If you don't already know what MLF and central bank money management tools are, then this article may be helpful. According to Panda Beibei, a netizen recently claimed to have created 2,133 original articles, among which the latest MLF news has become the most concerned topic recently. So, when the MLF is once again in the spotlight, how should we understand the operation of the central bank?
First, let's look at the specifics of this operation. On December 15, 2023, the central bank renewed the MLF that expired in December at excess parity. Of the 650 billion yuan MLF due in the month, the central bank's renewal amount reached 145 trillion yuan, the interest rate is still 25%。This is in a way more than the same behavior last month, and it has reached 1The scale of 45 trillion has become the largest record of net delivery in a single month.
However, this little news has not caused widespread discussion. Some of them believe that in the monthly MLF operation, it used to be closer to the common people and the economic environment, but this time it is different. For a country and economy that has always been committed to the pursuit of stability, any groundbreaking policy and financial development at any time will mean that some kind of key change is taking place.
Therefore, the following analysis will take the central bank's MLF operation as the starting point, combined with the definition, practical significance and characteristics of the monetary policy tool, and deeply analyze the hidden intention and real significance behind the central bank. Through the impact and trends that future financial policies may have on China's domestic economic environment, we will bring us some in-depth, attitude-based and evidence-based thematic discussions, so that you can have a deeper understanding and insight into economic trends.
Judging by the operation of the MLF monetary tool, we can see that some of the problems it embodies and reveals are not as simple as they seem. There are many articles in the world, but there are also people who can stand out from the crowd, and we hope that this article will help you gain a deeper understanding and mastery of MLF and central bank monetary management tools. In September 2014, the PBOC created a monetary policy tool known as MLF, which is suitable for commercial banks and policy banks that meet macroprudential management requirements, and is conducted by way of tender. Unlike long-term borrowing, MLFs have a loan term of three months to one year, and the interest rate is equivalent to the interest on the loan. The operation usually takes place in the middle of each month.
From the above description, we can see that MLF is a monetary policy tool between the short-term and the long-term. It gives banks a large amount of money to circulate more time. When the MLF matures, the central bank makes up for the maturing funds by issuing a new MLF, which is called"Sequel"。It should be noted that usually every "sequel" MLF is accompanied by a "reverse repo" operation to ensure that the liquidity of the banking system is sufficient and reasonable.
MLF plays an important role in monetary policy, and its changes and implications deserve close attention in order to gain insight into opportunities and guide decision-making.
Let's dive into this challenging topic!We don't seek the satisfaction of every reader, after all, reading and sharing is a personal choice. **Headline Gallery.
Now let's uncover the mystery of MLF together!
The central bank's monetary policy tools include not only reverse repos, but also a policy monetary tool known as MLF. There are certain restrictions on the use of MLF, and the central bank requires the use of its supplementary liquidity for support"Three rural"and small and micro enterprises. This also means that the use of funds is restricted by the central bank. Central banks prefer to use MLF because of its ability to help support a large number of small businesses and activate the capillaries of the social economy. This approach can better reflect the adjustment of the basic policy of monetary policy, that is, maintaining pressure, directional regulation and control, and structural adjustment, and has the characteristics of pre-adjustment and fine-tuning.
At the same time, reverse repo is also a way for the central bank to open up the market. By purchasing valuable ** from a commercial bank and repaying it by the bank after the maturity of the term, the bond returns to the bank account, thereby increasing market liquidity and increasing the amount of market liquidity. Short-term funding needs are usually resolved within 7 or 14 days.
The large reverse repo and medium-term lending facilities provided by the central bank can be regarded as the central bank providing short- and medium-term currencies through water release to increase market liquidity. The central bank's water release measures are relatively conservative, which can be said to be slightly spicy, and will not have a significant impact on the capital market. However, if the capital injection exceeds the market's expectations, it may be considered a large-scale release, which may have an impact on the risk appetite and expectations of the investment market, thereby triggering violent fluctuations in the stock and bond markets and distorting the measures originally taken to reduce social financing costs.
If the market needs more stimulus, the central bank has other monetary policy tools that can be used, such as hot and sour noodles (SLF), sweet and spicy noodles (TLF), extra spicy noodles (TMLF), etc. It is foreseeable that this hot powder family will introduce more new measures in the future, each with its own unique characteristics.
The message behind the MLF policy is that the central bank wants to maintain the liquidity of the real economy by supporting agriculture, rural areas and small and micro enterprises, and alleviate the financing difficulties faced by these industries that need to be supported.
In addition, the central bank has further increased the liquidity of these assets by expanding the range of acceptable collateral. In addition, the central bank also adjusts the interest rate structure, manages market liquidity and adjusts social financing costs through the transmission mechanism of MLF interest rate, LPR** interest rate and loan interest rate, so as to ensure that systemic risks do not occur in the financial market and maintain the stability of the financial system. Compared with mainstream monetary policy tools such as interest rate cuts, treasury bond issuance, and RRR cuts, the spicy powder policy can only be regarded as a snack. The central bank insists on not over-issuing money and large-scale water release, but chooses to use the spicy powder policy for flexible adjustment, which is not only expected by the market, but also a very effective way.
One *** in the headline gallery.
In the last month of 2023, the central bank conducted a record MLF operation. On the morning of December 15, the central bank issued a statement: in order to maintain reasonable and abundant liquidity in the banking system, to alleviate the short-term impact of bond issuance and payment, and to appropriately provide medium and long-term base money, the People's Bank of China carried out an open market reverse repurchase operation of 50 billion yuan and a medium-term lending facility (MLF) operation of 1.45 trillion yuan.
The other is on the official website of the central bank.
In terms of interest rates, the winning bid rate for the 7-day reverse repo is 18%, the same as before.
The winning bid rate for a 1-year MLF is 25%, the same as before. The scale of this operation is 197 billion yuan of reverse repurchase and 650 billion yuan of MLF expiration. Through the MLF operation, the central bank injected a net 800 billion yuan into the market, which set a record for the largest net injection in a single month in history, which is of great significance.
Generally speaking, the amount of funds released by the central bank at one time is about 500 billion yuan.
This time, the central bank invested 800 billion yuan through MLF operations, which is equivalent to 1The scale of the 6 standard RRR cuts. There is no time limit for the funds released by the RRR cut, but there is a time limit (1 year) for the funds released by MLF investment. Considering that the RRR cut is difficult to implement, the central bank can only rely on MLF operations to release money, so MLF operations will become the main monetary tool.
It should not be overlooked that the MLF interest rate determines the Loan Market ** Interest Rate (LPR). Therefore, the unchanged MLF rate in December indicates that the LPR announced in 20 is likely not to fall, although the RRR and rate cuts may be carried out next year.
The facts are so clear and easy to see, it's not complicated.
You can see all of this from the one ** provided by the Headline Gallery.
What kind of signal does this MLF operation send?Overall, the scale of the central bank's MLF operation was unexpected, which is a significant positive for the domestic economic environment and the financial asset market. RRR cuts can be regarded as an extensive means of flood irrigation, while MLF is a precise drip irrigation method with a time limit for the release of funds. The RRR cut may lead to an increase in the scale of bank credit, but the flow of this money has effectively escaped the control of the state. This is why, it seems, unlike the RRR cut, the operation of the money loan market is clearly a financial management tool that the central bank aims to impose precisely.
Wisely**, the PBOC has already injected a net RMB800 billion through the MLF this time, so the likelihood of another RRR cut this month is very low.
The purpose of the central bank's massive injection of money through MLF is to alleviate the current tight funding situation. With the central rise in the interest rate on interbank certificates of deposit and treasury bonds, coupled with factors such as the issuance of treasury bonds, the payment of taxes and the payment of reserves, etc., which have a pumping effect on market funds, the timely issuance of additional money can alleviate the situation of tight funds.
Secondly, since both the current ** and the real estate market are very volatile, the large-scale currency issuance is to boost market confidence.
Of course, achieving the GDP target at the end of the year and the impact of economic growth and financial support on performance during the year must also be one of the target demands.
The central bank chose MLF to issue money this time, what secrets can we see?
It is very realistic that while preventing the real estate bubble and blocking the financial market from harvesting arbitrage, it is necessary to replace the full release of water through monetary instruments to guide liquidity support. Today, our goal is clear: to put pressure on banks and financial institutions to change their strategies from the top down, and to support the private sector, small businesses, and the agricultural sector. We direct the flow of money through a limited, finite increment of currency.
Sadly, however, brokerage firms and real estate stakeholders have chosen to avoid problems and treat them with a cold attitude, and they are really pathetic people who can't see the truth. These self-proclaimed financial elites and hype gurus are actually deceiving themselves, and they have reached a high level of deceiving themselves.
What's more, the PBOC has been gradually rolling out the MLF tool since November last year and has been expanding its scale, which shows that the central bank's thinking on monetary and financial management has changed dramatically.
The market and various parties continue to call for RRR and interest rate cuts, and the shortcomings of the central bank's lax monetary management in the past have been fully revealed. This time, the central bank's actions taught a vivid lesson to many.
Recently, a political magazine mentioned that judging by the current economic situation, the possibility and necessity of taking timely action are high.
Therefore, it is increasingly likely that policy tools such as RRR and interest rate cuts will be implemented in a timely manner.
The above analysis reveals a key trend: both MLF operations and RRR cuts are important tools for the central bank to inject money, through which the scale of credit can be expanded and liquidity stimulus can be provided to the market. If the RRR cut does not work, then the subsequent MLF operation may become the main monetary tool. For those capitalists who are really looking for profits, they will feel that it is safer to speculate on other commodities such as onions, ginger and garlic than the risks of real estate. In this case, for those assets with a debt cycle of up to 30 years, dare to speculate on assets with liquidity of up to one year?The state is not efficient and strong enough in terms of liquidity management, but time-bound channels such as the real estate market are in a better position to control the situation. However, housing prices and property markets really do not need to be analyzed and speculated, and there is no need to worry about social funds. The key is, can participants in all aspects of the real estate economy still leverage financial leverage?Restrictive policies are only one aspect, and don't expect too much from property speculation and related speculation in the short term. When there is no volume in a market and the market is still there, it is actually because the fundamentals and the confidence and expectations of the participants cannot be supported. There is really no need to say much about China** in 2023. We only need to rely on the stimulation of the emotional side and the good news side to narrow the losses of the year. Looking ahead, we should remain rational and not have too high illusions and expectations about the short-term trend and New Year's Eve. Medium- to long-term trends and trends cannot be determined by these phased trends.
The purpose of the policy and financial moves is clear: to achieve the year-end GDP target and to give the economy a relatively decent end. Combined with the latest MLF trends, what practical implications can we get from it?Finally, attach a gallery of *** headlines.
Times are different, and there are things that need to be followed. With an outdated ticket, don't expect to find your place in a new boat. Don't worry, even if the speed is a little fast, if you can't understand it, you can watch it several times.
From the perspective of long-term economy and people's livelihood, the impact of MLF on the economy is not directly significant. After touching the banks, according to the current state of China's domestic economy, MLF will experience an inevitable period of stagnation.
For banks that rely on interest rate differentials to make money, although they urgently need to lend, considering that the end of the year is approaching, the central bank's MLF is likely to prepare funds for the start of the year of 2024 for financial institutions. Even if we usher in the beginning of 2024, which domestic industries and markets are worthy of banks lending aggressively for arbitrage?
It is very likely that the state-owned enterprises with a background of state-owned assets have successfully achieved the credit target of the New Year's bonus by carrying out arbitrage operations in the form of left-hand lending and right-hand deposits, which has nothing to do with the economic situation and residents' income. Subsequently, along with the MLF, there may be a new drama in the guidance of finance and capital at the national level, although this has not really happened yet.
It is important to remember that in the economic downturn adjustment stage, we need to be cautious about all the good news, and when the real ** appears, we do not need to rely on the good news. What do you think of young friends who like to tell the truth and are good at observation?If you have any questions, please leave a message. If necessary, you can also send a private message, we will communicate civilly, and the question will be answered. Thank you all for your support.