1. What do mlf and reverse repurchase mean?
the Medium-termLendingFacility, referred to as MLF, was founded by the People's Bank of China in September 214. Medium-term lending facility is a monetary policy tool for the central bank to provide medium-term base currency, which is aimed at commercial banks and policy banks that meet the requirements of macro-prudential management and can be carried out through bidding. The distribution method is pledge, and high-quality bonds such as national debt, central bank bills, policy financial bonds and high-grade credit bonds need to be provided as qualified pledges.
reverse repurchase refers to the transaction behavior that the financial lender gives the funds to the financial integrator, collects the securities as the pledge, recovers the principal and interest in the future, and releases the pledge of the securities. Investors or financial institutions can also conduct reverse repurchase transactions in stock exchanges and inter-bank bond markets.
The subjects of reverse repurchase transactions are banks, securities holders (borrowers) and cash holders; The participants in the reverse repurchase of exchanges are mainly institutional investors other than banks, such as money market funds and finance companies. Especially, the restrictions on the subscription ceiling of new shares now force many institutions to participate in reverse repurchase transactions.
We often hear about the reverse repurchase by the central bank, which generally refers to the trading behavior that the People's Bank of China buys securities from a primary dealer and agrees to sell the securities to the primary dealer on a specific date in the future. Reverse repurchase is the operation that the central bank puts liquidity into the market.
second, what is the difference between mlf and reverse repurchase?
1. Different distribution methods
mlf is mainly pledged loan. It means that commercial banks use bonds such as national debt, financial debt and senior credit debt as collateral to borrow large sums of money from the People's Bank of China.
reverse repurchase is mainly issued by the People's Bank of China buying securities from Shenzhen Stock Exchange and Shanghai Stock Exchange and selling them to these exchanges after a certain period of time.
2. Different operation modes
mlf is mainly carried out through external bidding of the exchange, and the bidding targets are mainly commercial banks, monetary funds, investment companies, etc.
reverse repurchase mainly means that the People's Bank of China lends money to commercial banks, and commercial banks use their own high-quality bonds as collateral to the People's Bank of China.
3. Different time periods
mlf is issued for a long time, generally ranging from three months to six months.
reverse repurchase is mainly a short-term behavior, which generally lasts no more than seven days.
4. Different purposes
mlf is mainly to reduce the financing cost of small and medium-sized enterprises, play the role of policy interest rate, and guide the national policy funds to flow to the real economy sector.
reverse repurchase is mainly an investment behavior made by the people's bank of China to revitalize the securities market. during the stock downturn, it can bring confidence to the stock market and thus stabilize the entire financial order.