Recently, I have been hearing or seeing the news that the central bank has implemented reverse repurchases for billions of dollars. So, what does the central bank's reverse repurchases mean?

What are the recent measures of the central bank's reverse repurchase? Let's first analyze it in the sense of the central bank's reverse repurchase: Reverse repurchase is the purchase of securities by the People's Bank of China (that is, the central bank) from primary dealers and agrees on a specific date in the future.

The transaction of selling securities back to a primary dealer.

That is to obtain pledged bonds and lend the money to commercial banks.

The main purpose is to release liquidity to the market, and of course, to obtain interest income from the repurchase.

The operation is that the central bank lends money to commercial banks, and the commercial banks pledge the bonds to the central bank. When they mature, the commercial banks repay the money and the bonds return to the commercial bank accounts.

Recent review of the central bank's reverse repurchase and central bank's monetary regulation: The People's Bank of China continuously implemented two-term reverse repurchase operations totaling 125 billion yuan through interest rate bidding on August 28, of which 7-day reverse repurchase operations totaled 65 billion yuan.

Yuan, the winning bid interest rate is 3.4%; the 14-day reverse repurchase operation is 60 billion yuan, and the winning bid interest rate is 3.55%.

On August 23, the People's Bank of China continuously implemented two-term reverse repurchases totaling 145 billion yuan through interest rate bidding. Among them, the 7-day reverse repurchase operation was 80 billion yuan, with a winning interest rate of 3.4%; the 14-day reverse repurchase operation was 3.4%;

The repurchase operation is 65 billion yuan, and the winning interest rate is 3.6%.

Last week’s net capital investment of 278 billion yuan was second only to the 353 billion yuan in the last week before the Spring Festival (January 16 to January 22), which was the second highest single-week capital investment during the year.

Today's 7-day reverse repo rate remains unchanged from last Thursday's 3.40%, while the 14-day reverse repo rate dropped 5 basis points from last Thursday to 3.55%, showing that the current market funding level is stabilizing and capital costs

is falling.

News on August 21: The central bank announced a 7-day reverse repurchase of 150 billion, a 14-day reverse repurchase of 70 billion, and a total of 220 billion ultra-large reverse repurchase data to weaken the current insufficiency in the money market and economic market.

Balance trend.

Analysis of recent central bank reverse repurchases: Facing the tightening of funds at the end of the month, the central bank still did not choose to cut the required reserve ratio to inject liquidity, but instead resorted to the historical "heavenly amount" of single-day reverse repurchases.

On the 21st, the central bank launched a 220 billion yuan reverse repurchase program, including a 7-day reverse repurchase of 150 billion yuan and a 14-day reverse repurchase of 70 billion yuan, setting a single-day reverse repurchase record.

The scale of buybacks reached a record high.

Since 50 billion yuan of reverse repurchase maturities were hedged yesterday, the net amount of funds injected in a single day on Tuesday was as high as 170 billion yuan, which was about 40% of the amount of funds released by a reduction in the deposit reserve ratio.

Against the background that expectations for RRR cuts have repeatedly failed, this has weakened the market's expectations for the introduction of RRR cuts in the short term to a certain extent.

The surge in reverse repurchase itself has shown that the market is short of funds.

Gao Dexin, a researcher in the fixed income department of Credit Agricole, said that the central bank's huge reverse repurchase is quite unusual and is intended to ease short-term liquidity tensions and "postpone" the current high expectations of a reserve requirement ratio cut to a certain extent.

In fact, from before and after the release of economic data in July to after the release of the negative growth data in foreign exchange holdings in July, before the "time window" for RRR cuts predicted by the market, the central bank "stayed on hold" and continued to carry out reverse repurchases frequently.

operate.

In this regard, market analysts believe that the current property market in various places is showing an overall recovery, and the risk of asset price rebound is increasing. At this time, if the floodgates are opened through "reduction in reserve requirements" to increase the supply of money and credit, it will aggravate overcapacity, overheating of investment and the property market.

Hot risks can also easily strengthen the market's inflation expectations.

CITIC Securities macro analyst Fu Xiongguang told Bank Information Port (www.yinhang123.net) that the expansion of the number of cities with rising housing prices in July and the expectation of a slight rebound in inflation in August will restrict the space for easing monetary policy in the short term.

If we carefully observe the reverse repurchases frequently used by the central bank in the past eight weeks, it is not difficult to find that the central bank's liquidity supply channels and methods are undergoing subtle changes.

On the one hand, the reverse repurchase rate has become a new interest rate benchmark in the market.

Yesterday, the 7-day reverse repo winning rate exceeded market expectations, rising 5 basis points to 3.40% from the previous reverse repo rate that had been stable for one month. This also led to higher capital prices that day and continued to maintain a tight balance of capital.

After the launch of reverse repos yesterday, the market was well supplied with funds, but repo rates of various maturities not only did not fall in response, but instead generally rose.

Data show that overnight and 7-day repo rates increased by 12.88 basis points and 12.17 basis points respectively, fully demonstrating that the guiding role of the central bank's reverse repo rate has become stronger.

On the other hand, reverse repurchases of various maturities are used alternately to make capital investment more precise.

In addition to the conventional tool of 7-day reverse repurchase, the central bank resumed 14-day reverse repurchase last week, locking in funds until the end of the month, expressing to the market its intention to maintain stable funding at the end of the month.

In fact, in the previously announced second quarter monetary policy implementation report of the central bank, reverse repos were ranked first among various liquidity tools.