"Dry season" drought-free funds fabrics smooth "clearance"
In the middle of the year, the funds that have not been “safe†in the past six months have been quiet. In June, the market funds were calm and the liquidity supply and demand continued to be balanced and loose, which was not the same as many market participants had expected. According to statistics, since June, the 7-day pledged repo rate, which has indicators in the short-term market interest rate, has even declined slightly, and the average level is at the low level in the past six months.
Market participants analyzed that this is not unrelated to the central bank's active liquidity regulation, and the Ministry of Finance has urged local pressure to reduce fiscal deposits, which also has a positive impact on market liquidity. In addition, the recent pressure on capital outflows has decreased, and the decline in foreign exchange holdings has narrowed, and the adverse impact on liquidity has been alleviated. Most institutions believe that although the short-term will be affected by the impact of the semi-final assessment and the impact of seasonal fluctuations, the liquidity risk is seasonally volatility. However, given the full expectations of market participants and the continuous stability of the central bank, it is expected that the liquidity risk will be generally controllable in the middle of the year. The funds are expected to cross the middle of the year.
Funds continue to be loose
In the past one or two trading days, there has been some convergence in the liquidity of the money market. The demand for funds over the overnight and individual cross-month periods has risen, and the willingness of the funders to lend funds has slightly weakened, indicating that liquidity bears as the half-year-end point approaches. The seasonal pressure is gradually emerging. However, in general, market liquidity supply and demand are still balanced, and the funding situation is still not tight. The feelings of most market participants are still loose.
Since June, the market funds have continued to show a balanced and loose situation, and the current capital price level is roughly equivalent to the end of last month. Observing the trend of inter-bank bond pledged repo rate, mainly in a small downtrend in early June, and a slight rebound after entering mid-June. Currently, the overnight repo rate is basically flat at the end of May, and the 7-day repo rate is still lower than the end of May. About 5 basis points; the one-month, 21-day and 14-day repurchase rates of the month have been relatively large, but there is no sign of continued increase; the longer-term 3-month repo rate has been in recent days. Downstream, the latest interest rate is equivalent to the end of May. In addition, since June, Shibor has continued to run at 2.95% for three months, with very little fluctuations.
In view of the short-term tightening of liquidity from time to time in the past, coupled with the critical time near the end of the half year, the liquidity situation from the beginning of June to the present is clearly better than expected. According to statistics, the monthly average of the 7-day repo rate in May was 2.43%, which was 6bp lower than that in April, ending the previous two-month uptrend. From June to now, the 7-day interest rate average dropped further to 2.38%, which was 12 last year. Low since the month.
Multi-factors help liquidity pick up
Market analysis believes that the central bank actively and flexibly regulates liquidity, reasonably increases the medium-term liquidity supply, and stabilizes the market's expectations for short- and medium-term liquidity. This is an important reason why liquidity has returned to good since May.
Recently, while the central bank continued to rely on open market operations to adjust short-term funding gaps, it has increased the frequency of structured or directional operations such as MLF and PSL to ensure strong liquidity support in the short and medium term, and actively guide and stabilize market expectations.
Market participants pointed out that the central bank's PSL and MLF operations are more normalized. While making up for the medium-term liquidity gap, it helps to stabilize the market's expectations for short- and medium-term liquidity and avoids pessimism to amplify market interest rate fluctuations. At the same time, providing emergency liquidity support through SLF operations can effectively play the role of the upper limit of the interest rate corridor to ensure that short-term liquidity fluctuations are controlled within the normal range.
It is worth mentioning that in May the Ministry of Finance issued a document requesting local finance to speed up the implementation of the budget, reduce the size of the deposit, and improve the use of financial funds. Market institutions believe that the move by the Ministry of Finance may prompt the acceleration of fiscal expenditures and accelerate the release of stock funds, which will have a positive effect on the liquidity of the banking system. According to statistics, the net increase in fiscal deposits in May this year was 161.9 billion yuan, the lowest in May of the calendar year since the release of monthly data in 2007.
In addition, the recent cross-border capital flows have stabilized, capital outflow pressures have declined, foreign exchange holdings have narrowed, and the negative impact on liquidity has been alleviated. This may be one of the main reasons for the recent liquidity and expected re-stabilization. .
According to the central bank, foreign exchange holdings decreased by 53.7 billion yuan in May this year. Although it decreased for the seventh consecutive month, the decline was the smallest in the past seven months.
The tone of the monetary policy is clearer
At the end of the half-year, the liquidity test once made the market quite tense. At least from mid-May, there were agencies that suggested preventing liquidity risks at the end of the half year. From the past years, the volatility of the money market at the end of the half year is almost inevitable. The new macro-prudential assessment system (MPA) assessment also adds uncertainty to the liquidity at the end of June this year. However, since June, the funds have been calm and the market's worries have gradually eased. More and more market participants believe that the performance of funds at the end of June may be better than expected.
Market participants pointed out that the central bank's SLF, PSL, and MLF operations are more frequent, and they cooperate with the conventional open market operations to enrich the central bank's policy tool portfolio for dealing with liquidity fluctuations. At the same time, the decline in foreign exchange holdings has been significantly narrowed compared with the previous period. As long as the recent capital outflow pressure is no longer significantly increased, the central bank can fully fill the liquidity gap caused by the reduction of foreign exchange holdings through MLF and other investments. In addition, under the guidance of the policy spirit of reducing local fiscal funds and accelerating fiscal expenditures, the release of stocks of fiscal deposits is expected to accelerate, and the Ministry of Finance and local finance departments also have the incentive to speed up the transfer of fiscal deposits to bank deposits through treasury cash deposits. Recently, the Ministry of Finance has carried out a $80 billion three-month central treasury cash deposit operation, which has increased the medium-term liquidity of the banking system.
Due to the foresight of the end of March, the organization actively strengthened liquidity management at the end of the half year, and all parties responded positively. It is also expected to mitigate the substantial impact of the semi-final assessment on liquidity. In the short-term, although the end of the half-year is gradually approaching, the impact of the MPA assessment will gradually emerge, and the financial market fluctuations at home and abroad will bring certain uncertainty, but considering that all parties including the central bank have their own In preparation, the possibility that funds will be able to survive the middle of the year is getting bigger and bigger.
Of course, the overall liquidity risk in the middle of the year is controllable, which means that the central bank is less likely to implement RRR cuts. Under the pressure of maintaining exchange rate stability, the conditions for reversed repurchase and MLF operating rates are not fully adjusted, and market interest rates will still face The constraints at the bottom of the previous period. In short, the possibility of funds crossing the half-year-end point is greater. The future liquidity is generally innocent and the volatility is expected to decline. However, the monetary policy's stable tone is more clear, and the central bank's institutional liquidity demand tends to be “enough†but no matter “ Full, the liquidity of the money market has become difficult to achieve extremely prosperous situation.
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