①Today, 12.2 billion yuan reverse repos will mature, in addition to 1450 billion yuan MLF and 80 billion yuan of treasury cash deposits maturing. The central bank conducted a 981 billion yuan 7-day reverse repo operation. Industry insiders believe that under the new framework of the central bank, there may be a reserve requirement ratio cut once this year, possibly as early as November.
Financial Association, November 15 (Reporter: Cao Yunyi) Today, with the large MLF maturity coinciding with tax periods, the funding situation is facing a major test. However, the market believes that the large amount of MLF maturities this month and the impact of government bond issuance are all short-term disruptive factors, and fluctuations in the funding situation are controllable. Looking ahead, the core disruption in the funding situation still lies in government bond supply.
Insiders believe that the underlying logic of the current policy has changed, especially as the central government's leverage space has clearly opened up. Specifically regarding the mmf side, the overall direction will continue to be accommodative, with another reserve requirement ratio reduction possibly occurring within the year.
This month's large MLF maturity means short-term fluctuations in the funding situation are controllable.
Today, the central bank conducted a 981 billion yuan 7-day reverse repo operation in the open market, with an operation rate of 1.50%. Wind data shows that 12.2 billion yuan in reverse repos will mature today, in addition to 1450 billion yuan in MLF and 80 billion yuan in treasury cash deposits maturing.
Yesterday, the Shanghai Interbank Offered Rate (Shibor) for overnight loans decreased by 0.9 basis points, reported at 1.456%. The 7-day Shibor increased by 3 basis points, reported at 1.674%. From the repo rate performance, the weighted average rate of DR007 rose to 1.7174%, above the policy rate level.
In addition, from a funding perspective, the total reverse repos maturing this week is 84.3 billion yuan, with 80 billion yuan in treasury cash deposits maturing, and 1450 billion yuan in MLF maturing. The maturity size is relatively large and will be delayed until the 25th to be renewed, leading the market to pay attention to the hedging actions the central bank will take.
However, regarding the fluctuations in the funding situation, the market expects that fluctuations will be controllable in the short term. "This month’s large MLF maturity, along with the issuance of government bonds and other impacts, presents relatively more disruptive factors to market liquidity, but these disturbances are all within expectations," said Zhou Maohua, a macro analyst at china everbright bank's financial markets department, to the Financial Association.
Zhou Maohua pointed out that the central bank has previously increased the counter-cyclical adjustment efforts of mmf and accelerated fiscal expenditures. The central bank employs various open market operation tools to nurture market liquidity, keeping it reasonably ample. Additionally, the central bank has created operations for the buying and selling of government bonds and reverse repos, thus making liquidity management more refined." Zhou Maohua stated.
The supply of government bonds is the main cause of disturbances in the funds market, and the market expects a potential reduction in reserve requirements within the year.
Huaxi believes that looking ahead, the core disturbance in the funds market still lies in the supply of government bonds. "With the convening of the National People's Congress Standing Committee, the supply pressure for this year has basically landed. If calculated according to the upper limit of 2 trillion yuan, the cumulative net issuance of government bonds from November to December may be around 3 trillion yuan, whereas last year's net supply of government bonds in November to December was 2 trillion yuan, and the supply peak this year in August to September is 3.3 trillion yuan, with one reduction in reserve requirements still expected this year." Analyst Xiao Jinchuan from Huaxi said. In comparison, the supply pressure in November to December may be within the market's bearing range.
Combined with the latest released macro data, the market's expectations for a reduction in reserve requirements within this year are increasing, with some views suggesting that there may be a reduction in reserve requirements in November and possibly a cut in interest rates in the first half of next year.
Chief economist of Guosheng Securities, Xiong Yuan believes that looking ahead, the underlying logic of current policies has changed, especially with the clear opening of the imagination space for central government leverage. "Specifically in terms of mmf, the direction will extend its loosening, and a reduction in reserve requirements is very likely within the year, with a possibility of interest rate cuts as early as January next year."
"Under the central bank's new framework, it is expected that there will be a reduction in reserve requirements in November, and potentially a cut in interest rates in the first half of next year." Chief analyst of Tianfeng Fixed Income, Sun Binbin believes that from policy signals, external uncertainties and domestic macro pressure may have an impact, but will not change the direction of monetary easing, including the potential for interest rate cuts.
Zhou Maohua pointed out that currently, the domestic low price environment and the overseas policy shift provide sufficient room for conventional measures such as interest rate cuts and reductions in reserve requirements. "Considering subsequent positive fiscal implementations, increased government bond issuance, and seasonal factors as disturbances in the funds market, the central bank does not rule out further introduction of tools such as reductions in reserve requirements to stabilize market liquidity and maintain the cost of bank liabilities and net interest margins."
