The central bank's open market operations were flat this week, with MLF maturing next week totaling 237 billion RMB
The central bank's open market operations were flat this week, with 237 billion MLF maturing next week. Whether the MLF will be "cut" next week has become a major focus for the market. The central bank conducted 8 billion yuan of 7-day reverse repurchase operations this week, resulting in a net fund inflow of 20 billion yuan. On Monday next week, 237 billion yuan of 1-year MLF will mature, and the market is watching whether the central bank will cut interest rates. The central bank's monetary policy operations are stable, supporting the steady recovery of economic data. It is expected that in the second half of the year, there may be a possibility of reserve requirement ratio cuts and interest rate cuts to cope with the accelerated pace of local government bond issuance. China Everbright Fixed Income Research Report believes that the probability of lowering MLF interest rates is limited, and the necessity and urgency of lowering interest rates are not high at present. Commercial banks' net interest margins have fallen to historical lows, and a rate cut may bring greater pressure on net interest margins
Since June, the central bank's open market has once again returned to "small-scale" reverse repurchase operations. This week, the central bank conducted a total of 8 billion yuan in 7-day reverse repurchase operations, as there were 10 billion yuan in 7-day reverse repurchase maturing this week, resulting in a net fund withdrawal of 2 billion yuan for the week.
Details of this week's reverse repurchase operations and maturity are as follows: (unit: billion yuan)
Although approaching the mid-month tax payment deadline, the overall liquidity in the market this week remained relatively balanced and slightly loose. The central bank's open market operations were relatively flat this week, except for the Dragon Boat Festival holiday on Monday, with daily reverse repurchase operations of 20 billion yuan to maintain the "small-scale" style.
Whether the central bank will "cut interest rates" on MLF next week has become one of the main focuses of the current market, with 237 billion yuan of 1-year MLF maturing on Monday. In May, there was no "interest rate cut", and the central bank continued with 125 billion yuan of MLF at a rate of 2.50%.
According to analysts cited by the Shanghai Securities News, China's monetary policy operations are stable, balancing multiple objectives to support steady economic recovery. Monetary policy is expected to strengthen in the third quarter, with room for both reserve requirement ratio cuts and interest rate cuts, highlighting the precision and effectiveness of monetary policy objectives and operations. Ming Ming, an analyst at CITIC Securities, believes that in the second half of the year, there may be flexible coordination between reserve requirement ratio cuts and open market operations. Since the beginning of the year, the pace of local government bond issuance has been slow, with a higher scale of local government bonds to be issued in the second half of the year and a more concentrated issuance schedule. It is expected that during the concentrated stage of government bond supply in the third quarter, reserve requirement cuts will be used to release low-cost liquidity for hedging.
However, a report from Everbright Fixed Income believes that the probability of lowering MLF interest rates in June is quite limited. The necessity and urgency of guiding actual loan interest rates down by lowering MLF interest rates are not high at the moment. The recent slowdown in the growth rate of M2 and other financial data is not primarily due to a contraction in effective financing demand from the real economy, but rather due to the impact of "squeezing out excess liquidity". Furthermore, at this time, lowering MLF interest rates to guide actual loan interest rates down will create some new challenges. In the first quarter of this year, the net interest margin of commercial banks had dropped to a historical low of 1.54%. Lowering MLF interest rates at this time would put greater pressure on net interest margins, not only affecting the sustainability of financial support for the real economy but also creating room for fund hoarding and "low lending, high deposit" arbitrage.
Next week, there will be 10 billion yuan of 7-day reverse repurchase maturing, with 40 billion yuan, 20 billion yuan, 20 billion yuan, and 20 billion yuan maturing from Tuesday to Friday respectively. On Monday next week, 237 billion yuan of 1-year MLF will mature.
Details of next week's central bank open market maturities are as follows: (unit: billion yuan)
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