Recently, the central bank has continued to increase the 14-day reverse repo investment, releasing a positive signal to care for the New Year's Eve capital side. Experts said that near the end of the year, liquidity is facing many disturbances, and it is expected that the central bank will increase its operation in the open market to iron out short-term capital fluctuations, and the pressure on market liquidity demand is expected to ease after the New Year's Eve, and market interest rates will fall.
With 2024 approaching, the market's expectations for a new round of RRR and interest rate cuts are heating up. Experts expect that the medium-term lending facility (MLF), the open market operation rate, and the loan market ** interest rate (LPR) are expected to be lowered at the beginning of next year.
Liquidity demand rises.
As the end of the year approaches, the central bank has launched a 14-day reverse repurchase operation since last Monday (December 18), and has invested a total of 1,000 billion yuan as of December 25. This is the third time that the PBOC has carried out a 14-day reverse repo operation this year, after the previous two 14-day reverse repo launches on January 11 and September 15 respectively.
At present, the demand for funds has increased and liquidity has a certain impact. "According to the usual law, near the end of the month, the end of the quarter and the end of the year, the short-term liquidity demand of financial institutions has increased significantly, especially the strong demand for cash funds across the year and other factors may bring certain disturbances to liquidity. Jones Lang LaSalle Greater China Chief Economist and Director of Research Pang Ming said.
Liang Si, a researcher at the Bank of China Research Institute, said that in December, factors such as bond issuance, year-end foreign exchange purchase demand, regulatory assessment, changes in fiscal revenue and expenditure, and holiday capital demand may have a certain impact on liquidity. At the end of the month, the pressure on liquidity demand may rise, and the approaching New Year's Day holiday will also lead to an increase in the demand for cross-holiday liquidity by financial institutions.
From the perspective of market interest rates, as the New Year's Eve approaches, 14-day funds** have risen significantly, and overnight and 7-day have remained relatively stable. Wind data shows that as of December 25**, DR001 (interbank market 1-day bond collateral repo rate) and DR007 (interbank market 7-day bond collateral repo rate) were reported at 154% and 182%。
Generally speaking, the seasonal pattern of the trend of the funding rate around New Year's Day is relatively stable. For example, in the week before New Year's Day, the funding rate will probably fall first and then rise, and after the holiday, it will be loosened first and then tightened. Sun Binbin, chief fixed income analyst of Tianfeng**, said.
Open market operations are expected to intensify.
In order to protect market liquidity, experts expect that the central bank will increase its open market operations in the coming period, and the scale of cross-year capital investment is expected to increase steadily.
It is expected that the central bank will increase the 7-day reverse repo in the coming week. Qin Han, a fixed income analyst at Zheshang, said that considering that the current cross-year rhythm of the banking system and non-bank system is comparable to that of previous years, as well as the recent rapid decline of the DR007 hub, it is expected that the overall capital side will be worry-free.
The People's Bank of China said a few days ago that it will comprehensively use a variety of monetary policy tools to maintain reasonable and abundant liquidity, and that the scale of social financing and the amount of money will match the expected target of economic growth and the highest level.
With the combined use of a variety of monetary policy tools, liquidity is expected to remain reasonably abundant. Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, said that the overall market liquidity is expected to remain reasonable and abundant, especially at important times such as the end of the year and the Spring Festival.
According to the report of the fixed income team of the CITIC Research Institute, December is usually a big month for fiscal spending, and a considerable part of the additional issuance of treasury bonds will also form spending during the year. Along with the use of treasury bonds, the increase in fiscal expenditure will cause the treasury funds to flow into the banking system, which will play a role in replenishing liquidity and be conducive to the easing of funds.
There is room for policy rate cuts.
With 2024 approaching, many experts are expecting a new round of RRR and interest rate cuts.
At this point in time, banks have lowered deposit rates, stabilizing net interest margins and opening up space for the central bank to cut policy rates. Yang Yewei, chief analyst of Guosheng ** fixed income, said that in order to avoid the increased pressure on the loss of bank deposits after the deposit rate is lowered, the policy interest rate and interbank funds need to be further reduced.
*: China ** Daily.
Editor: Wang Di.