Expert: In August, MLF "volume and price fell together", LPR ushered in further downward space

In order to maintain the liquidity of the banking system reasonable and abundant, on August 15, 2022, the People's Bank of China launched a 400 billion yuan medium -term lending convenience (MLF) operation (including the continuation of the 600 billion MLF expiration of 600 billion yuan on August 16) and the publicity of 2 billion yuan. The market reverse repurchase operation fully meets the needs of financial institutions. The bid interest rates of the mid -term borrowing convenience (MLF) operation and public market reverse repurchase operations were 2.75%and 2.0%, respectively, and all decreased by 10 basis points.

1. In August, MLF gently shrunk by 200 billion yuan, which meets market expectations. It meets the bank's accompanying "passive" recovery of the city and the central bank. However, compared to the previous round of MLF shrinkage, the scale of the reduction is not large, indicating that the central bank does not want to release the signal of excessive tightening monetary policy, and it will still maintain a state of reasonable and abundant basic currencies.

Since April, under the coordination of monetary policy and fiscal policy, the market liquidity has always been in a state of abundant state. The main market interest rates such as overnight funds, 7 -day capital interest rates, and 1 -year banking deposit return have continued to decline. Essence In early August, DR001 dropped to near 1%, DR007 fell below 1.3%, all reached the lowest level since this year. On August 12, DR001 closed at 1.04%, DR007 closed at 1.35%, and DR007 was lower than 7 days of inverse repurchase policy interest rates of 75bp. The 1 -year interbank deposit bill expiration rate (AAA) also fell below 2%in early August. Although it has risen slightly in recent days, it still maintains a lower level of 2.02%. The "inverted" of MLF interest rate expanded to 83bp.

Under the abundant liquidity, the prefecture interest rate of the currency market, and the decoupling of secondary interest rates, the demand for reverse repurchase and MLF operations by first -level dealers can make financing through the issuance of interbank deposits; and since August, since August The assets of the assets continued and the use of funds was high. The demand for bank treasury for the issuance of interbank deposits was also not high. In this context, MLF "passive" shrinkage with lower cost performance was in line with market choices.

In the "Implementation Report of China's Monetary Policy in the Second quarter of 2022", the central bank also explained the reverse repurchase of reverse repurchase in July, stating that "due to the continued decrease in the bidding volume of the first -level dealers, the central bank further reduced the amount of inverse repurchase operations accordingly However, it still fully meets the needs of bidding agencies. "It means that the central bank has continued to carry out inverse repurchase shrinkage since July. It is more" passive "response, rather than actively shrinking to release tightening signals. Therefore, with the abundant liquidity and the insufficient demand for first -level dealers, the August MLF shrinkage is also expected, and it will not have a greater impact on market expectations.

2. In August, the interest rates of MLF and inverse repurchase policies decreased by 10 basis points. Beyond market expectations, it should be mainly due to stability of the domestic economic recovery foundation, and focusing on stabilizing the real estate financing chain to accelerate broad credit transmission.

From the perspective of economic fundamentals, in July, the manufacturing PMI fell 1.2 percentage points to 49%again, and fell to 50%of the Rongku line. The high -prosperous fields were mainly concentrated in the direction of policy stimulus infrastructure and cars. From the perspective of financial data, in July, the "second collapse" of credit and social finances increased by 679 billion yuan in the month of the month, a significant increase of 404.2 billion yuan year -on -year. In July, the total amount of financial data and structure were not good, and the overall weaker than the seasonal nature, indicating that the investment willingness of the physical department was still weak. Credit demand has continued to be weak since August, and the low -level operating rate of bills has not been fully repaired after the effective demand for vitality in the economy and the impact of the epidemic. At this time, the central bank needs to adopt a certain counter -cyclical adjustment measure to alleviate the situation of increasing economic downward pressure and boost market confidence.

From the perspective of the real estate financing chain, as a key link of wide credit, the real estate development loans and mortgage loans have performed poorly in the second quarter, and the overall downward pressure continues to increase. Weak, residents' willingness to leverage continues to be sluggish. In this context, the average interest rate of the new corporate loan loan was reduced to 4.16%in June, a decrease of 42bp from the beginning of the year, a new low of statistics; the average interest rate of personal housing loans in June was 4.62%, a significant decrease of 101bp from the beginning of the year. However, compared to the new loan, the interest rate of the stock mortgage is still at a high level, and the demand for mortgage replacement is accelerated. In the context of the reduction of residents 'income and a large debt burden, reducing policy interest rates and guiding LPR reduction will also help to release bonus bonuses for mortgage loans and increase residents' consumption expectations.

Third, after the decline in the policy interest rate, it is not ruled out that the possibility of simultaneous reduction of LPR in the first and 5 -year LPR of the month, but the probability of the asymmetry of LPR above 5 years is greater.

Judging from the 1 -year LPR quotation, the current level of 3.7%is relatively low. The level is lower, and even the pricing of some regular deposits forms upside down. In this case, if you continue to guide the 1 -year LPR reduction, it is also easy to exacerbate the arbitrage behavior of the enterprise and increase the risk of emptiness of funds. However, if the subsequent economic recovery is not as good as expected, the repair of consumption and investment continues to be weak, and the 1 -year LPR interest rate will still have room to reduce.

In comparison, the probability of asymmetric lowers of LPR above 5 years is greater. In the current weak environment of housing-related loans, compared with the actual 7-9 % off interest rates in the past few years, the interest rate of mortgage loans still has a large decline. And the current 5-1YLPR curve spread is still 75bp, and the adjustment space still exists. Fourth, follow -up monetary policy direction and other monetary policy tools are launched

Due to the large amount of MLF expiration from September to December, in the current environment with abundant liquidity, subsequent MLFs may continue to shrink. With the slowdown of the Federal Reserve ’s interest rate hike rhythm and the policy tone of“ I ’m dominated”, the possibility of cutting interest rates again does not rule out. The probability of decline in the third quarter is not high, but if the real estate financing has improved in the fourth quarter, the process of wide credit is accelerated. With the recovery of structural liquidity shortages, it provides long -term liquidity to the banking system and further reduces liabilities for liabilities. The cost is not ruled out that 0.25 percentage points will be performed in a timely manner.

In addition, the necessity of guiding the interest rate of loans to further decline, the necessity of subsequent liabilities is further strengthened, and liability cost control measures are expected to be issued.

5. How to evolve in follow -up funds

The current MLF reduction does not have the meaning of policy signal, and even if the amount of shrinkage is reduced, the substantial impact on the capital surface is also limited. The overall monetary policy will maintain a loose state and wait for the changes in economic and financial data. In the future, the core driving factor that truly reverses the trend of capital interest rates is still the formation of substantial wide credit.

6: The impact on the stock market, bond market and real estate market

Impact of the bond market: Under the expected interest rate cut, the interest rate rate of the bond market has been significantly downward, and the interest rate of 10Y Treasury bonds exceeded 2.7%downwards. In the future, under the effect of superimposition such as the overall interest rate center, loose liquidity, and slow economic recovery process. The interest rate of the bond market is "easy to make up and difficult", and the upward space is not large, and the overall shaping will maintain a low level.

Stock market impact: interest rate cuts are conducive to boosting the stock market, short -term benefits.

The impact of the housing market: interest rate cuts help the decline in LPR of more than 5 years, which will improve the real estate financing chain. However, the specific improvement is still required to continue to observe and other supporting measures.

(Zhang Liyun, Chief Economist, China Minsheng Bank Chief Economist, Zhang Liyun, Director of the Financial Market Research Center of China Minsheng Bank)

- END -