Reading Special Draft | What market vane is behind the central bank's "interest rate cut"?

Everyone knows the common sense of "things are rare". The supply and demand of currencies is also the same: there are more money. If there are fewer people who want to borrow money and spend money, the interest rate will decline; less money, more people who want to borrow money and spend money, the interest rate will rise.

On August 15, the central bank launched the 400 billion yuan medium -term loan convenience (MLF) operation (including the continuation of MLF expiration on August 16) and the 2 billion yuan open market reverse repurchase operation. 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, both decreased by 10 basis points from the previous period.

The decrease of 10 basis points attracted the cheers of the market "the central bank's interest rate cuts", and the capital market and the media were even more cheered. In fact, the important thing is not cheering, but to clarify the ins and outs of the matter and look at the real picture behind it.

What is the original intention of winning the bid interest rate?

What is interim borrowing convenience (MLF)? What is an open market reverse repurchase? Let's first come to the two concepts of science.

Mid -term lending convenience (MLF)

In the mid -term loan convenience (MLF), commonly known as "spicy powder", when financial institutions need money, they can pledge the securities in their hands and borrow money from the central bank. Considering that there may be a lot of financial institutions that need to borrow money, the central bank conducts interest rate bidding. Everyone borrows money from the central bank competitively, and finally forms a bid interest rate.

Open market reverse repurchase

The public market reverse repurchase is similar to the operation of "spicy powder". When financial institutions need money, sell bonds to (essentially mortgage) central banks, and central banks lend the money to financial institutions. In the future, they will repay their principal and interest. Also bid for interest rates to form a winning bid rate.

It can be seen that "spicy powder" and reverse repurchase are all the central bank borrowed money to financial institutions, and they are bidding for interest rates. Interest rate bidding and competition between financial institutions are market -oriented. The bid interest rate is a market -oriented interest rate to a certain extent. It is not set by the central bank, but the market. If the interest rate of winning the bid is not reduced, it is not the central bank's interest rate cut, but the market interest rate reduction.

Keep in mind that this bid interest rate is the interest rate of the central bank borrowed money to financial institutions, not the credit interest rate of financial institutions borrowed money to enterprises and residents. The central bank just wants to guide the credit interest rate of financial institutions to borrow money to enterprises and residents by guiding the bid interest rate, and then affect the capital needs of enterprises and residents. This fully reflects the "central" role of the central bank and is guiding rather than compulsory.

Data Map: People's Bank of China.

Why does the bid interest rate decline?

This time, the two categories of winning bids have decreased by 10 basis points, which shows that the market will of capital demand -the enthusiasm and urgency of financial institutions to borrow money from the central bank have decreased.

On the one hand, my country's currency supply has increased. At the end of July 2022, the general currency M2 was 25.781 trillion yuan, an increase of 1.952 trillion yuan from 23.829 trillion yuan in December 2021. The increase in so many currencies in the first 7 months is a new record, which is almost equivalent to the currency increase in 2020 or 2021.

On the other hand, due to the three pressures of my country's economic development facing "demand contraction, supply impact, expected weakness", at the same time, the new crown epidemic, Russia -Ukraine conflict, the game of large powers, the Fed's currency tightening, global inflation and other risks. Enterprises pursue "cash as king, stable profitability", and loan financing and scale expansion have become a cautious thing. Residents began to repay the loan in advance and borrowed it with caution. This further derives the phenomenon of "asking for loans" in financial institutions instead of the previous "cherish loan" or "survival" phenomenon.

The demand for borrowing money from financial institutions to financial institutions has declined, and the demand for financial institutions to borrow money from the central bank will decline. In this way, the "spicy powder" and inverse repurchase interest rates have declined with the market willingness.

It can be seen that the decline in the bid interest rate is a comprehensive result of increased currency increase and multiple risks.

What does the decline in the bid interest rate mean?

The interest rate of financial institutions borrowing money from the central bank has decreased, and the cost of borrowing money from financial institutions from financial institutions may also decline. Among them, the most vane is the loan market quotation interest rate (LPR) announced on the 20th of each month. LPR is the basic reference interest rate for financial institutions to borrow money to enterprises and residents. It is foreseeable that the future LPR may also decline with the decline in the bid interest rate.

It should be pointed out that this time, the two types of bid interest rates have fallen by 10 basis points. This decline is not large or small. Saying "not small" reflects the central bank's guidance intention. The key is to strengthen market confidence, because confidence is more important than gold. Saying "not big" means that the bid interest rate may still have a downlink space in the future, and the central bank will guide the camera choice according to the economic operation trend.

In fact, the biggest vane of the decline in the interest rate of winning bids is that money has become cheap, the cost of using money is reduced, and it is easier to spend money. Whether it is the capital market or the real economy. This provides an important market opportunity.

In the future, I want to do things and want to provide better products and services for the world. Money is no longer a fundamental bottleneck constraint. The fundamental constraint is to provide better products and services. The scarce is no longer money, but abilities. The market is priced by capacity, which is a normal logic of economic and social operation.

It can be seen that the bid interest rate is a mirror, and the world is in the world.

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