In order to maintain reasonable and sufficient liquidity in the banking system and the smooth operation of the money market during the special period of epidemic prevention and control, the People's Bank of China will launch a 1.2 trillion yuan open market reverse repurchase operation to inject funds on February 3 to ensure liquidity. There is an adequate supply of liquidity, and the overall liquidity of the banking system is 900 billion yuan more than the same period last year.
Industry experts said that the central bank's move will help financial institutions manage liquidity and maintain the smooth operation of money market interest rates.
Intensify open market operations
Wen Bin, chief researcher of China Minsheng Bank, said that historically, after the Spring Festival, a large amount of cash invested before the holiday flows back into the banking system, and the banking system When seasonal liquidity demand declines, the central bank generally suspends open market reverse repurchase operations and naturally withdraws liquidity through the expiration of reverse repurchase.
Compared with 2019, the Spring Festival holiday is from February 4th to 10th. Wind data shows that in the first week after the holiday (February 11th to 17th), there were 680 billion yuan in reverse repurchases and 3930 yuan in reverse repurchases. The medium-term lending facility (MLF) of 100 million yuan expired. At that time, the central bank did not conduct hedging, and all 1.073 billion yuan of central bank liquidity tools expired to achieve a natural net withdrawal.
Due to holiday adjustments in 2020, this week (February 3 to 9) *** 1.18 trillion yuan of central bank reverse repos will expire. Among them, the central bank’s reverse repos will expire on February 3 Purchases (including deferred central bank reverse repos) amounted to 1.05 trillion yuan.
Market analysts believe that the amount of maturing funds in the first week after the holiday this year is larger and very concentrated. However, the central bank’s approach is also super seasonal and the hedging is very strong, which can ensure sufficient liquidity in the banking system and currency stability. The market operates stably.
It is worth noting that Wen Bin pointed out that the central bank usually issues an announcement on the day of open market operations, but this time it gave an advance notice, which helps financial institutions manage liquidity and maintain currency. Market interest rates run smoothly.
Boost financial market confidence
“On February 3, the stock market will usher in the first trading day after the holiday. The demand for funds held by all parties increases, which requires monetary policy Increase countercyclical operations to provide necessary guarantees for the smooth operation of the financial market," said Li Peijia, a senior researcher at the Bank of China Research Institute.
“According to normal conditions, the current market is not short of money. However, considering the special factors of the epidemic, timely injection of large amounts of liquidity can help eliminate the panic of some investors.” Chief Economist of China Construction Bank Scholar Huang Zhiling said that the central bank releases clear policy intentions in a timely manner, and market entities make their own market judgments and adjust their behaviors accordingly, which helps avoid market liquidity risks caused by synchronized operations.
Wen Bin said that the central bank's move reflects the determination and operational flexibility of ensuring liquidity supply, and provides "reassurance" for financial institutions to support epidemic prevention and control, serve the real economy and maintain financial market stability. , which is conducive to stabilizing the expectations of financial institutions and boosting confidence in the financial market.
In Huang Zhiling's view, the central bank's response measures during this special period are not only important measures to stabilize the recent financial market, but also send a strong signal to the market to fulfill the central bank's new mission. It is recommended that regulatory authorities seize the opportunity to introduce relevant policy measures and guide investors to focus on industry analysis and listed company analysis instead of worrying about market-level liquidity.
Structural tool support is expected to increase
Wang Yifeng, chief analyst of the banking industry at Everbright Securities Research Institute, said that the following adjustments to monetary policy may be made in the next stage: First, a loosening trend It will continue, the overall liquidity is relatively abundant, and the funding interest rate will decline marginally; secondly, structural support will be further increased; thirdly, the loan market prime rate (LPR) reduction is imperative, and RRR and MLF interest rate reductions can be expected. Fourth, it is not ruled out that the central bank will lower the benchmark deposit interest rate.
Li Peijia believes that in the future, the epidemic prevention and control situation will still be an important variable that dominates the operation of the financial market. Financial risks in some regions and some industries will rise, especially the debt repayment pressure of some small and medium-sized enterprises. In the future, all departments will need to take measures to prevent excessive fluctuations in the financial market, and pay more attention to guiding financial resources to focus on key regions, industries and companies fighting the epidemic.
Li Peijia said that standing lending facilities, re-loans, re-discounts and other tools can be used to provide low-cost funds to financial institutions; guide MLF interest rates and LPR downwards to reduce corporate financing costs.