Financial Association News on September 26th (Editor Yang Bin): The supply of certificates of deposit has increased significantly this year, and the balance of interbank certificates of some banks is about to reach the limit. The market is concerned about factors such as the registered quota and its impact on the supply and price of certificates of deposit. Currently, there is a small possibility of banks adjusting the quota of interbank certificates of deposit, and the liability pressure on banks in the fourth quarter will be alleviated. In September, the one-year AAA-rated interbank certificate of deposit interest rate first rose and then fell, dropping another 10 basis points to 1.87% in the past two weeks.

According to the statistics of Sun Binbin, the chief fixed income analyst at Tianfeng Securities, as of September 23rd, a total of 392 banks have disclosed their interbank certificate of deposit issuance plans for 2024, with a total registered quota of approximately 26.9 trillion yuan. As of September 23rd, there have been approximately 23.1 trillion yuan issued this year, approximately 20 trillion yuan maturing this year, approximately 3.1 trillion yuan in net financing this year, and a current balance of approximately 17.8 trillion yuan.

Financial Association News has previously reported that against the backdrop of continuous deposit migration, the phenomenon of large banks lacking liabilities has intensified, and banks this year have been particularly reliant on financing through certificates of deposit. According to data from Choice, last year in the first three quarters, a total of 18.96 trillion yuan in interbank certificates of deposit were issued, with only 0.4 trillion yuan of net financing realized. With this year's issuance and net financing significantly exceeding last year's, will the subsequent issuance of interbank certificates be affected by the registered quota?

According to the "Interbank Certificate Management Interim Measures", deposit-taking financial institutions issuing interbank certificates of deposit must file an annual issuance plan with the People's Bank of China before the first interbank certificate issuance each year. Deposit-taking financial institutions can determine the issuance amount and term of each interbank certificate within the registered quota for the year. The registered quota is managed as a balance, and the balance of interbank certificates at any point in the year shall not exceed the registered quota for the year.

Given that the registered quota for certificates of deposit is managed as a balance, currently, the overall balance of interbank certificates of banks this year still has a significant gap compared to the registered quota, indicating sufficient issuance space.

However, there is significant differentiation among different banks, with some banks about to reach the limit. Further statistics from Sun Binbin show that the total registered quota for the six major state-owned banks in 2024 is approximately 7.2 trillion yuan, and the balance of certificates of deposit in state-owned banks is approximately 5.9 trillion yuan, accounting for about 82.04%. The total registered quota for joint-stock banks in 2024 is approximately 8.3 trillion yuan, and the balance of certificates of deposit in joint-stock banks is approximately 5.7 trillion yuan, accounting for about 68.75%. Among them, quotas for Agricultural Bank of China, Bank of China, China Construction Bank Corporation, and CBHB have been almost fully utilized.

Chart: The proportion of the balance of state-owned banks in the registered quota for this year.

(Source: Cailian Press compiled by Tianfeng fixed income)

Due to the increased supply of government bonds in August, the pressure on banks' balance sheets increased as the matching intensified. The increase in structured deposits supply led to stagnant interbank structured deposit rates. Recently, the secondary market rates for interbank structured deposits have resumed their downward trend. In the past two weeks, the yields at maturity of AAA-rated interbank structured deposits for 3 months, 6 months, 9 months, and 1 year respectively decreased by 4 basis points (BP), 9 BP, 10 BP, 10 BP to 1.84%, 1.86%, 1.87%, 1.87%. The market is paying close attention to factors such as the record filing quota's impact on structured deposit supply.

Yang Yewei, Chief Fixed Income Officer of Guosheng Securities, believes that the government bond supply in the fourth quarter will significantly decrease compared to the third quarter, easing the funding strain on banks. Meanwhile, September and October mark the peak maturity period for structured deposits, with a substantial decrease in maturities in the fourth quarter, further alleviating the funding strain on banks.

As structured deposit balances approach their limits, theoretically, banks may apply to modify their record filing quotas. However, according to Sun Binbin's statistics, historically, banks rarely adjust their structured deposit record filing quotas. In the absence of adjustments to the record filing quotas, state-owned banks will resort to alternative funding methods, such as increasing offline interbank deposits.

Liang Weichao, Chief Fixed Income Officer of China Post Securities, stated that considering the potential for further policy rate cuts later this year, the price of structured deposits in September may 'rise first then fall,' and the subsequent attempts to raise prices may struggle to surpass the peak levels. However, the supply-demand contradiction in structured deposits is unlikely to significantly ease within the year, and the overall price of structured deposits may remain volatile.

Yang Yewei believes that the implementation of reserve requirement and interest rate cuts will lead to a decrease in funding rates. If funding rates return close to policy rates, with DR007 and R007 around 1.5%, according to a central estimate of a 20 BP margin between structured deposits and funding rates, the one-year structured deposit yield is expected to decline to around 1.7%.