Liquidity tightening, capital price rising, how to go in the second half of the year?

category:Finance
 Liquidity tightening, capital price rising, how to go in the second half of the year?


According to the data of the national interbank lending center, from July 13 to July 27, the central bank realized a net investment of 165 billion yuan through open market operation. In addition, the central bank has extended the medium-term lending facility (MLF) and the targeted medium-term lending facility ahead of schedule. On July 23, the central treasury cash management commercial bank fixed deposit operation was 50 billion yuan.

On the one-day trading, the interest rate of Shibor was 15.507% higher than that of Shibor 10.50bp, indicating that the overnight trading rate of Shibor continued to rise by 1.50% compared with the overnight quotation of Shibor 10.001 The seven day pledge repo rate (dr007) quoted by Yidi was 2.1958%, which remained stable; in addition, the capital price of the exchange also rose significantly, gc001 rose to 2.100% overnight, and gc007 rose to 2.490%.

Liquidity pressure remains in the third quarter

The 21st century economic news reporter interviewed a number of inter-bank fund traders and learned that after the middle of May, capital prices rose mainly due to three factors: first, the anti epidemic special treasury bonds and local bonds increased the issuance, absorbing more liquidity; second, the central bank prevented fund arbitrage and liquidity accumulation, weakened the open market operation; third, the epidemic situation eased Superimposed on the economic recovery, enterprises demand for funds increased, and various interest rates, including inter-bank capital interest rate, rose more.

The issuance of special treasury bonds and local bonds will absorb more liquidity. In order to smooth the weekly issuance of government bonds, the issuance of local bonds in June and July decreased significantly. However, if the issuance of local government bonds is basically completed before the end of September in 2019, the issuance peak of local bonds will be ushered again in August and September, which will also be the main factor affecting the liquidity in the next three quarters One of them. The fund transaction manager of a joint stock bank in the Pearl River Delta said, in addition, with the economic recovery, the most relaxed stage of capital has passed. It is almost impossible for the future market to have dr001 lower than 1% and dr007 interest rate lower than 1.5%. However, returning to normal does not mean that monetary policy is tightened. It is expected that MLF interest rate will be the capital price center and pledge in the medium and long-term money market in the future It would be a desirable range for overnight repo rates to fluctuate between 1.8 and 2.1.

UBS Securities China stock strategy team issued a paper that the central bank continued to maintain the reverse repurchase and MLF operating interest rates unchanged, indicating that there is still no willingness to increase easing on monetary policy in the short term, and credit is expected to continue to strengthen. When GDP growth in the second quarter rebounded to 3.2% year-on-year, it is unlikely that the central bank will further relax in the short term. It will still be cautious about the liquidity supply, but the policy does not hope that the liquidity will be significantly tightened. In the future, after the negative pressure of tax period on capital has subsided, the pressure from the supply of interest rate bonds may continue for a period of time. From August to September, the issuance of general treasury bonds and local government bonds will speed up, and the supply pressure of interest rate bonds may ease in the fourth quarter.

Multiple game of monetary policy

From late January to mid May, affected by the epidemic situation, domestic and foreign production and operation activities were sluggish. In order to ensure the resumption of work and production of enterprises, the monetary policy increased the support for liquidity from the aspects of volume increase and price reduction. The inter-bank market liquidity was abundant, and the capital price rapidly fell. The interest rate of dr001 was the lowest to around 0.7%, and the interest rate of dr007 was as low as 1.25%.

Since then, with the promotion of enterprises returning to work and production, the macroeconomic data performance in the second quarter was relatively strong, and the regulatory authorities began to strengthen the governance of arbitrage of capital idling, and the pace of money supply slowed down. In April and may, the reverse repurchase operation was rarely carried out. After April, the LPR interest rate was not lowered again, and the capital price also hit the bottom and rose. The highest value of dr007 reached 3%, which is also stable at more than 2%. To some extent, the above similar signs make the market more worried about the central banks monetary policy turning to tightening, and the market is also discussing the operational trend of monetary policy in the second half of the year.

Liao Zhiming, chief banking analyst of Tianfeng securities, said that considering the steady recovery of domestic economy, it is expected that the policy interest rate composed of MLF interest rate and other components will remain unchanged in the second half of the year, and LPR interest rate will also remain unchanged. In addition, with the economic growth approaching the pre epidemic level, the special policies for the epidemic situation are gradually withdrawn. However, the policy withdrawal tightening is gradual. It is estimated that the policy interest rate may be slightly increased in the first half of 2021.

On the other hand, a number of analysts also said that although Chinas GDP growth rate in the second quarter was restored, there was an imbalance in the structure of economic recovery, that is, the recovery of production and infrastructure investment was much faster than that of consumption and capital expenditure, and the uncertainty of geopolitical conflicts would also adversely affect the pace of economic recovery in the second half of the year. According to the Statistics Bureau, the total retail sales of consumer goods fell by 3.9% in the second quarter.

Since the end of April, there are indeed signs of a pause in Chinas loose monetary policy, but I think it is far from over. This is because, first, the current economic recovery is still relatively fragile, the recovery of production is far faster than the recovery of demand, so we need to worry about the deflation and solidification of PPI. Second, the financing cost of enterprises is still relatively high. Third, there is still a very large interest rate gap between China and other major economies. Liu Ligang, managing director of Citibanks research department and chief China economist, said, from a macro point of view, monetary policy should continue to be loose in the second half of the year, while risks such as fund arbitrage should be solved through more strict supervision and macro prudential policies. According to Liu Ligangs prediction, the deposit reserve ratio will be reduced by 50 basis points twice in the second half of the year, and the MLF interest rate will be reduced by 20 basis points in the third quarter, so as to achieve the target of RMB 20 trillion of new loans and RMB 30 trillion of social financing, and consolidate the achievements of economic recovery. However, the central bank may not adjust the LPR price for five years, which can also change investors expectations of the real estate market. Source: Yang Bin, editor in charge of economic report in the 21st century_ NF4368

Since the end of April, there are indeed signs of a pause in Chinas loose monetary policy, but I think it is far from over. This is because, first, the current economic recovery is still relatively fragile, the recovery of production is far faster than the recovery of demand, so we need to worry about the deflation and solidification of PPI. Second, the financing cost of enterprises is still relatively high. Third, there is still a very large interest rate gap between China and other major economies. Liu Ligang, managing director of Citibanks research department and chief China economist, said, from a macro point of view, monetary policy should continue to be loose in the second half of the year, while risks such as fund arbitrage should be solved through more strict supervision and macro prudential policies.

According to Liu Ligangs prediction, the deposit reserve ratio will be reduced by 50 basis points twice in the second half of the year, and the MLF interest rate will be reduced by 20 basis points in the third quarter, so as to achieve the target of RMB 20 trillion of new loans and RMB 30 trillion of social financing, and consolidate the achievements of economic recovery. However, the central bank may not adjust the LPR price for five years, which can also change investors expectations of the real estate market.