What signal? The central bank has a net daily withdrawal of 111 billion yuan! Market | Interest Rate | Central Bank
To maintain the reasonable and sufficient liquidity of the banking system, on August 3rd, the People's Bank of China launched a 3 billion yuan reverse repurchase operation through interest rate bidding. Due to the expiration of 114 billion yuan of reverse repurchase on the same day, the public market achieved a net withdrawal of 111 billion yuan.
Industry experts have stated that in the future, the central bank will flexibly use various tools to carry out open market operations based on changes in liquidity supply and demand and market interest rates, continuously maintain reasonable and sufficient liquidity, and maintain stable market expectations and smooth operation.
Flexible image reduction and reverse repurchase investment
Since August, the central bank has significantly reduced its investment in reverse repo, with 7-day reverse repo investments of 8 billion yuan, 9 billion yuan, and 3 billion yuan respectively from August 1st to 3rd.
"Recently, the central bank's open market operation was in line with the past practice. After the factors at the end of the month, the market interest rate fell significantly, reflecting that the market capital level was loose. The central bank flexibly operated to reduce the volume of open market operations, to ensure that the market interest rate converged near the policy interest rate, and to maintain reasonable and abundant market liquidity." Zhou Maohua, a macro researcher in the financial market department of Everbright Bank, said.
Some industry insiders have also stated that the market liquidity has been relatively loose recently, mainly due to the decline in demand for short-term funds by institutions, resulting in a relatively loose market funding situation.
The funding situation will continue to be loose
From factors such as MLF maturity, fiscal investment, and accelerated issuance of local bonds, the funding situation in August will continue to be loose.
Specifically, from the perspective of fiscal investment, Jin Yi, Chief Analyst of Fixed Income at Guohai Securities, stated that although August is not the last month of the quarter, it is also a "net fiscal investment month". From January to June 2023, there was not much difference in the net fiscal revenue and expenditure data compared to the same period in previous years. Therefore, the net fiscal expenditure in August may also have a scale of 400 billion to 500 billion yuan, which will form a certain supplement to the capital.
"The maturity scale of MLF in August is 400 billion yuan, which has increased compared to July, but the difficulty of hedging is not significant. In addition, at the current stage, when there is significant pressure for fund adjustments such as tax periods and end of month, the central bank is actively increasing liquidity investment, with a clear intention to maintain stability. It is expected that funds may continue to remain stable," said Zhou Guannan, Chief Analyst of Fixed Income at Huachuang Securities.
In terms of funding interest rates, Jin Qianjing, Chief Analyst of Shenwan Hongyuan Research Bond, stated that the central bank's attitude towards funding is still positive, and the probability of a significant tightening of funding is not high. The focus of funding is still on rhythm and magnitude. From the perspective of credit disbursement and seasonal factors, there is still a high probability of a month on month decline in the funding interest rate in August compared to July.
The recent work conference for the second half of 2023 held by the Central Bank and the State Administration of Foreign Exchange also clearly requires the comprehensive use of various monetary policy tools to maintain reasonable and sufficient liquidity.
In Zhou Maohua's view, the current fiscal and monetary policies continue to be biased towards positivity. The central bank uses various monetary policy tools, operates flexibly, protects funding, and creates a suitable monetary environment for the recovery of the real economy. It is expected that market liquidity will continue to remain reasonably abundant.
