Caixin News Agency, November 7 (Reporter Xia Shuyuan): The latest Caixin News Agency "C50 Wind Index" results show that new crediting in October may be weak, and the growth rate of social financing has decreased slightly. Market institutions expect the median forecast for new mmf loans in October to be 0.58 trillion yuan, a decrease of 0.16 trillion yuan year-on-year; another forecast for new social financing in October is 1.47 trillion yuan, a decrease of 0.38 trillion yuan year-on-year, with 80% of institutions predicting that the cumulative year-on-year growth rate of social financing will be less than 8%.

In terms of prices, the market expects the CPI to fall month-on-month and remain unchanged year-on-year; the month-on-month decline in the PPI is converging, with a possible improvement in the year-on-year reading. Specifically, market institutions forecast the median CPI for October to be 0.4%, and the PPI year-on-year decline to narrow to -2.5%. In terms of funds, market institutions believe that under a supportive monetary policy direction, the central banks still have considerable room for balance sheet expansion. In addition to regular pledge-style reverse repurchase operations, a comprehensive use of RRR cuts, government bond transactions, and repurchase operations will be used to balance the supply and demand of funds in the banking system and maintain short, medium, and long-term liquidity reasonably abundant.

"C50 Wind Index Survey" is initiated by Caixin Media and completed by various research institutions in the market. The results can reflect the market's comprehensive expectations of macroeconomic trends, monetary policies, and financial data. Nearly 20 institutions participated in the survey of this issue.

The central point of the DR007 fund rate is expected to be higher than the policy rate level in November, and the phenomenon of fund stratification is unlikely to improve in the short term.

Looking back at October, overall fund rates tended to decline, and fund stratification further intensified.

Regarding central bank operations, in October, the central bank gradually increased open market injections, while MLF continued to shrink by 700 billion yuan. In addition, the central bank also conducted 500 billion yuan of repurchase operations, net purchased 200 billion yuan of bonds, supplementing liquidity.

Entering November, how will the funding situation evolve under incremental policies? According to a Caixin News Agency survey, the market generally expects a slightly tight neutral funding environment in November. Of the 16 market institutions participating in the funding survey, 9 believe there is no significant liquidity gap; 4 believe there may be a certain liquidity gap; 3 believe there are no liquidity concerns for the year.

It is noteworthy that despite the overall stability of the money market after the central bank's reserve requirement ratio and interest rate cuts were implemented at the end of September, the non-bank financing cost has been relatively high since October, leading to a significant widening of the R-DR fund interest rate spread.

Looking ahead to November, citic securities' research report pointed out that in response to the large amount of MLF maturities at the end of the year and the potential impact of government bond supply, the central bank continues to expand its monetary policy tools, accumulating sufficient liquidity control measures. After continuous interest rate cuts in the third quarter, the recent interbank certificate of deposit issuance rates have not shown a significant decline, possibly indicating that banks still have strong liquidity demand.

Additionally, although the inflow of incremental funds into the equity market has little impact on the total funds of the banking system, it has exacerbated the volatility and fragility of fixed-income wealth management products on the liability side. It is expected that in November, the central DR007 funds rate is likely to remain slightly above the policy rate level, while the R007 funds rate may exhibit increased volatility and a structure characterized by a trend of being easier to rise than to fall.

Zhongtai securities fixed income chief analyst Zeng Yu also stated that in November, the central DR007 rate is expected to continue to be around 1.6% - 1.65%, slightly higher than the 10BP policy rate level.

In terms of the fund layering trend in November, Zeng Yu believes that in the medium term, with the decline of the certificate of deposit yield to a low level leading to increased outflow of money market funds, and the gradual compression of credit spreads to the levels of August and September reducing non-bank leverage demand, the fund layering is expected to be marginally relieved, but the timing may be more towards the later stage.

Zhongtai securities chief fixed income officer Xiao Yu stated: "If the excess reserve ratio further decreases, the tension in the non-bank liability side may continue as seen in October, making it difficult for the fund layering phenomenon to significantly improve in the short term, with little chance of a decrease in certificate of deposit rates."

Fiscal increment boots are yet to land, and there is still considerable room for the central bank's balance sheet expansion.

On October 12th, the Ministry of Finance stated at a press conference at the State Council Information Office that in the near future, it will introduce incremental policies including a one-time significant increase in debt limits to replace local hidden debts, issuance of special national bonds to supplement core tier-one capital of state-owned banks, allowing special bonds to be used for land reserves and purchase of existing homes, indicating that the central government still has considerable room for debt issuance and deficit expansion, conveying positive policy signals.

According to industry insiders, although the Standing Committee of the National People's Congress convened earlier this month may involve adjustments to the fiscal budget, considering the relatively limited window for bond issuance at the end of the year and the ample liquidity hedging tools of the central bank, the possibility of fiscal payment factors significantly affecting the liquidity situation might not be high.

"Overall, in November, fiscal support for liquidity will be higher than the seasonal level. However, attention needs to be paid to the possible addition of a fiscal deficit in the November People's Congress meeting. If there is a trillion-level increase in government bond issuance by then, it will disturb liquidity. However, it is expected that as long as the additional scale is within 2 trillion yuan, given the current slightly supportive stance of the central bank, the impact on funds is expected to be limited." Zeng Yu said.

Li Yishuang, Chief Analyst of Fixed Income at Sinolink Securities, judged that under the baseline expectation, assuming there may be additional issuance of 500 billion national bonds and 400 billion special refinancing bonds during the year, the net financing scale of government bonds in November and December corresponds to 910 billion and 460 billion; If an additional 500 billion special national bonds are issued during the year to supplement the core Tier 1 capital of large commercial banks, then the net financing scale of government bonds in November and December may reach 1.06 trillion and 0.81 trillion, but the supply pressure will still be significantly lower than in August and September this year.

From the perspective of monetary policy, multiple market institutions believe that the probability of coordinating with fiscal support to supplement the liquidity gap is high, with a 25-50 basis point reserve requirement cut, and an interest rate cut expected next year.

"There may still be room for a 25-50 basis point reserve requirement cut during the year, possibly landing in November in conjunction with the bond issuance rhythm, mainly impacting the short-end of the bond market more." Liu Yakun, Fixed Income Analyst at China Galaxy Securities, stated.

"Overall, under the supportive stance of monetary policy, it is expected that the central bank still has significant room to expand its balance sheet. On the basis of regular pledged reverse repo operations, it will comprehensively use reserve requirement cuts, government bond transactions, and repurchase operations to balance the supply and demand of funds in the banking system, maintaining reasonable and ample liquidity at short, medium, and long maturities." Industry insiders said.