Heavy! The central bank ＂cut interest rates＂ by 10 basis points for the first time this year! Offshore RMB plummeted by 200 points.
On the morning of June 13th, the central bank finally issued a heavy signal: In order to maintain liquidity in the banking system’s reasonable abundance, the People’s Bank of China launched a 2 billion yuan reverse repurchase operation by way of interest rate bidding, and the winning bid rate was 1.90%, compared with 2.00% before.Compared with the previous winning bid, the interest rate dropped by 10 basis points. And this is also fromIt was lowered for the first time since mid-August last year.
It is worth noting that the current 7-day reverse repo rate is already the lowest in history.
After the news was announced, confidence in the financial market was boosted, and treasury bond futures opened higher across the board. The 30-year main contract rose by 0.22%, the 10-year main contract rose by 0.23%, the 5-year main contract rose by 0.12%, and the 2-year main contract rose by 0.04%.
In addition, the offshore RMB against the US dollar plummeted by more than 200 points in the short term, falling below the 7.17 mark.At present, the offshore RMB has fallen by 0.22% against the US dollar to 7.1720 RMB.
The bond market has started a hurricane mode. The yield of major inter-bank interest rate bonds declined rapidly, with the yield of 10-year CDB active bond "23 CDB 05" falling by 2.41bp, and the yield of 10-year Treasury active bond "23 Treasury Bond 12" falling by 3bp. Treasury futures opened higher across the board, with 30-year main contracts up 0.22%, 10-year main contracts up 0.23%, 5-year main contracts up 0.12% and 2-year main contracts up 0.04%.
Wind data shows that the bid-winning rate of the 7-day reverse repurchase operation in the open market of the central bank was lowered twice in 2022, on August 15, 2022 and January 17, 2022, both by 10bp. Based on this calculation, the bid rate in the 7-day reverse repurchase operation in the open market was lowered for the first time in nearly 10 months.
Wang Qing, chief macro analyst of Oriental Jincheng International Credit Rating Co., Ltd., told Interface News that there are two reasons behind the central bank’s downward adjustment of policy interest rate. First, since the second quarter, the economic recovery has been steady and weak, and the property market has also reappeared in a downturn, which requires the steady growth policy to make timely efforts. The reduction of policy interest rate and the recent reduction of bank deposit interest rate will effectively drive down the real loan interest rate of enterprises and residents, thus stimulating credit demand and promoting consumption and investment.
"More importantly, this policy interest rate cut has released a clear signal of steady growth, which will effectively boost consumer and investment confidence and promote the real estate industry to achieve a soft landing as soon as possible." He said.
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Recently, after a number of banks successively lowered the listing interest rates of some deposits again, the market paid more attention to the interest rate cut in June.
From the past experience, the simultaneous reduction of "reverse repo rate-—MLF rate-—LPR" has completed a complete interest rate reduction process. After the "reverse repurchase and interest rate reduction", many experts predicted that this would have a chain reaction to the market and drive down the interest rates of other policy instruments such as MLF and LPR.
Dong Ximiao, chief researcher of Zhaolian Finance, told CBN that if the winning bid rate of MLF continues to drop on June 15th, it will help to further reduce the bank’s capital cost. In addition, since September 2022, the deposit interest rate has been lowered for several rounds, and the bank’s debt cost has declined. This month, the loan market quotation rate (LPR) is expected to end for nine consecutive months, and it is expected to drop by 5-10 basis points.
According to China, a brokerage firm, a one-year medium-term loan facility (MLF) of 200 billion yuan will expire on Thursday. With the mid-month tax payment approaching and MLF operation approaching this week, the fluctuation of funds in the whole market may increase. In this case, the expectation of MLF interest rate reduction or even excessive continuation is further improved. After the MLF interest rate is lowered, it usually means that the probability of lowering the LPR interest rate will also increase greatly. Since this expectation has not been fulfilled before, if we respond to market concerns this time, it should have a greater positive stimulus to the equity market.
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Recently, the six major banks have successively updated the listing interest rates of RMB deposits, and the interest rates of demand deposits and time deposits have all been lowered, and the medium and long-term time deposits have been lowered even more. Following the six major banks, on June 12, some national stock banks announced that they would lower the interest rate of RMB deposits.
CITIC Securities believes that the adjustment of listing interest rate is expected to save 2-3bps deposit cost for banks. Considering the range of deposit cost pressure drop and the time when the effect appears, combined with the current macroeconomic environment, there is still a greater possibility of subsequent MLF interest rate cuts.
In addition, in June, the important window period of steady growth in the second half of the year officially arrived. Based on the recent economic and financial data and market sentiment, the necessity of interest rate cuts has also increased significantly. In June, the one-year MLF interest rate may be lowered by 5-10bps. In addition, there is room for banks to further reduce the interest rate of deposit products. If the interest rate is lowered, it is expected that the 10-year national debt yield to maturity will further decline.
Obviously, the FICC research team also believes that the adjustment of listing interest rate is expected to save 2-3bps deposit cost for banks.Considering the range of deposit cost pressure drop and the time when the effect appears, combined with the current macroeconomic environment, the team believes that there is still a greater possibility of subsequent MLF interest rate cuts.
The team also believes that lowering the MLF interest rate can promote the faster decline of the incremental loan interest rate, and at the same time release a stronger signal of "steady growth", thus providing support for economic recovery.
However, considering that the short-term depreciation pressure of the RMB exchange rate is rising and the Fed stops raising interest rates, there is still uncertainty. There may still be some suspense in MLF operation this week.The MLF operation is about to land in June this week, and the Federal Reserve’s meeting on interest rates in June will also be held. Under the environment of weak economic fundamentals, there is a certain possibility of subsequent MLF interest rate cuts, and June has also become an important policy observation period; In contrast, the market has high expectations for the Fed to suspend interest rate hikes in June, but there are still differences on when the end point of interest rate hikes will appear in the market. Superimposed with the rising pressure of RMB exchange rate depreciation in the short term, MLF operation may still have some suspense this week.
National business daily comprehensive China People’s Bank website, interface news, brokerage China, CBN, brokerage research report.
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