Offshore RMB plummets by 200 points, sudden! The central bank unexpectedly cut interest rates by basis points | interest rates | offshore
On June 13th, according to the website of the People's Bank of China, in order to maintain the reasonable and sufficient liquidity of the banking system, the People's Bank of China launched a 2 billion yuan 7-day reverse repurchase operation through interest rate bidding, with a winning interest rate of 1.90%, a decrease of 0.1 percentage points from the 2% interest rate level of the previous day.
This is the first adjustment of the 7-day reverse repurchase operation interest rate since August 2022. It is worth noting that the current 7-day reverse repurchase rate level is already the lowest in history.
According to an interview with industry experts by First Financial News, today the winning bid interest rate for the 7-day reverse repurchase operation in the open market of the People's Bank of China has decreased by 10 basis points, which is conducive to balancing multiple goals such as maintaining price stability, financial stability, and supporting the real economy.
After the news was announced, confidence in the financial market was boosted, and treasury bond bond futures opened up all over the country. The 30-year main contract rose 0.22%, the 10-year main contract rose 0.23%, the five-year main contract rose 0.12%, and the two-year main contract rose 0.04%.
In addition, the offshore renminbi fell sharply by over 200 points against the US dollar in the short term, breaking below the 7.17 mark.
Currently, the offshore Chinese yuan has fallen 0.22% against the US dollar to 7.1720 yuan per dollar.
10 basis points decrease to release strengthened countercyclical regulation signal
After the optimization and adjustment of epidemic prevention policies, since the beginning of 2023, China's economic prosperity has gradually increased. However, after entering April, multiple indicators show that the current macroeconomic downward pressure in China is still significant.
Data shows that at present, the cumulative year-on-year growth rate of China's CPI has been declining for three consecutive months, and the PMI has rapidly declined to near the boom bust line in the past two months.
In fact, currently, China's economy is in the recovery stage after the impact of the epidemic. The driving force of economic growth is gradually increasing, household consumption is steadily increasing, and the vitality of market entities is gradually recovering. The Chinese economy can maintain long-term and sustained stable growth. Meanwhile, the recovery of the real economy from the epidemic also requires a process.
According to industry experts interviewed by reporters, the 10 basis point decrease in the bid interest rate for the 7-day reverse repurchase operation in the open market of the central bank today not only reflects the supply and demand of the capital market, but also releases policy signals to strengthen countercyclical regulation and stabilize market expectations, which is a precise and powerful manifestation of prudent monetary policy.
![Offshore RMB plummets by 200 points, sudden! The central bank unexpectedly cut interest rates by basis points | interest rates | offshore](https://a5qu.com/upload/images/a21ea686b4ccea57ed2dee4c1e7fe1ce.jpg)
The person told reporters that this reflects a balance between multiple policy objectives. In recent years, the adjustment of interest rates in China has followed a relatively stable "middle path" without significant fluctuations. The bid interest rate for this open market reverse repurchase operation has decreased by 10 basis points, with a moderate magnitude, which is conducive to balancing multiple goals such as maintaining price stability, financial stability, and supporting the real economy. It also takes into account internal and external balance, and maintains the basic stability of the RMB exchange rate at a reasonable equilibrium level.
Pang Ming, Chief Economist and Director of Research at Jones Lang LaSalle in Greater China, told First Financial reporters that from a quantitative perspective, today's 2 billion yuan reverse repurchase operation fully hedges today's maturity, indicating that market liquidity remains reasonable and abundant, supply and demand balance, and there is no need for large-scale injection to maintain stable funding. This is consistent with the recent steady decline in overnight repo rates and 7-day repo rates, and also demonstrates the flexible, precise, and timely implementation of regulation based on the central bank's liquidity supply and demand and market interest rate changes, maintaining a reasonable and sufficient state of market liquidity, and maintaining the stable operation of currency market interest rates.
The attention to interest rate cuts in June has increased
Recently, after several banks have repeatedly lowered some deposit listing rates, the market's attention to the June interest rate cut has gradually increased.
From past experience, the synchronous reduction of "reverse repurchase rate MLF rate LPR" has completed a complete process of interest rate reduction. After the "reverse repurchase interest rate cut", many experts predict that this will have a chain reaction on the market and drive down the interest rates of other policy instruments such as MLF and LPR.
Dong Ximiao, Chief Researcher of Zhaolian Finance, told First Financial that if the mid-term lending convenience bidding interest rate continues to decrease on June 15th, it will help further reduce the cost of bank funds. Due to multiple rounds of deposit interest rate cuts since September 2022, the cost of bank liabilities has decreased. This month, the quoted interest rate in the loan market is expected to end the nine consecutive months of inaction, and it is expected to decrease by 5-10 basis points.
Pang Ming believes that from the perspective of price, the new round of deposit interest rate reduction cycle is beneficial for commercial banks to alleviate their net interest margin pressure, reduce debt side costs, and suppress fund idle activities, and open up more policy space for continuing to reduce MLF or LPR. From the micro level motivation of market entities such as commercial banks, the willingness and probability of guiding LPR downward through price reductions and points are stronger.
Pang Ming also stated that from the perspective of precise and effective implementation of a prudent monetary policy, today's reduction of the reverse repo winning bid interest rate will release more policy signals to stabilize market expectations, strengthen countercyclical regulation, promote financial institutions to continue to benefit the real economy on the asset side, promote the stable and moderate reduction of comprehensive financing costs for enterprises and personal consumption credit costs, create a moderately tight, stable and neutral monetary and financial environment for economic recovery, peace, and healthy development, and do a good job of continuous, precise and effective coordination and cooperation between macroeconomic control policies, stabilize the foundation of economic recovery, boost development confidence, stimulate market vitality, and promote sustained recovery and improvement of economic operation.
Recently, the Governor of the People's Bank of China, Yi Gang, presided over a symposium in Shanghai, emphasizing the next stage of "continuing to implement a prudent monetary policy with precision and strength, strengthening countercyclical adjustment, and fully supporting the real economy", "maintaining a moderate and steady pace of monetary and credit volume, and promoting the comprehensive financing cost of the real economy to be steadily reduced.".