First, risk prevention is one of the important reasons. Recently, the policy layer has repeatedly released the signal to achieve stable growth and long-term balance of risk prevention. In the context of "relative shortage" of liquidity and the need to maintain a certain frequency of reverse repurchase, the central bank's appropriate extension of the operating period will help curb leveraged transactions and prevent liquidity risks. Second, guide market expectations. Compared with 7 days, the time limit is longer, not too tight; However, the cost of financing has increased, and compared with the demand for liquidity index maturity matching brought by the longer asset delivery period of commercial banks, this extension is not a substantial change, but the cost of capital is indeed higher. Therefore, the derivative market's understanding of restarting 14 day reverse repurchase is marginal tightening. Liquidity restarted in August: since the middle of the year, the central bank has greatly increased its liquidity in the open market due to the incremental issuance of local special bonds and the mid-month tax period. However, since the later period, the funds have been significantly tightened, and DR007 has been running at 2.20% for several consecutive trading days. The monthly average of overnight rate has reached a new high in the year, and the liquidity stratification situation has intensified. The interest rate in the medium and long-term money market is still rising slightly. September liquidity outlook: the supply pressure of interest rate bonds has declined, but the scale is still high, which has obvious siphon effect on the capital surface. The pressure of structural deposits has fallen and NCD has expired, and the bank's debt side is facing a certain gap. However, with the continuous development of finance in the second half of the year, fiscal expenditure has supplemented liquidity to some extent. It is expected that the central bank will cooperate with the issuance of local bonds to replenish liquidity in a timely manner, and the funds may maintain a tight balance.
I. Overview of core viewpoints
1. Special features of this 14-day reverse repurchase restart: non-annual and non-holiday time.
Looking back on the reverse repurchase history of 65,438+04 days and above since 2065,438+06, we can find that except for the second half of 2065,438+06 to the end of 2065,438+07, the reverse repurchase of 65,438+04 days and above is mainly concentrated around the Spring Festival, the end of the season, the middle of the year and the end of the year, and mainly concentrated in the middle and late months. /kloc-a small amount of reverse repurchase with a term of 0/4 days or more will occur in non-Spring Festival or quarter-end months, such as May, July, August, 10, 1 1, April, May and July of 20 18. To sum up, the reverse repurchase of 14 days is concentrated in late August, which is very rare in history.
In 20 16, from the end of August at that time, the central bank began to carry out 14 days of reverse repurchase operations more frequently than in the past. While alleviating the pressure of liquidity supply and demand, the comprehensive capital cost was raised by "sealing short and releasing long" at that time. In hindsight, this was an early clue to the shift of monetary policy at that time. By the third quarter of 20 18, due to the abundant inter-bank liquidity, the reverse repurchase operation on 14 was only used for the ferry of liquidity at the end of the quarter and during the Spring Festival, as well as the stability of funds in special periods.
Back to the present, on the one hand, August is not the end of the season, nor is it a big month for paying taxes; On the other hand, on August 25th, the central bank did not need to carry out 14-day reverse repurchase in order to stabilize the funds at the end of the month. Since the third quarter of 20 18, even at the end of the quarter, there has been 14-day reverse repurchase.
2./kloc-Behind the 0/4-day reverse repurchase restart
First, "risk prevention" may be an important reason why the central bank launched 14-day reverse repurchase in August.
Recently, the policy layer has repeatedly emphasized the importance of risk prevention. 16 In August, Guo Shuqing, Party Secretary of the Central Bank and Chairman of the China Banking Regulatory Commission, published an article "Unswervingly Fighting and Resolving Financial Risks" in Qiushi magazine [1]. In his article, he pointed out that "after the expectation of downward consistency of interest rates is strengthened, it may encourage leveraged trading and speculation and give birth to a new round of asset bubbles. Real estate prices in some places began to rebound, and financial resources may once again be concentrated in high-risk areas. Borrowers with poor credit may maliciously evade debts through preferential policies such as deferred repayment, and high-risk shadow banks with complex structures are also prone to make a comeback. " At the same time, he stressed that "in the face of the complicated and severe economic situation, it is necessary to respond to outstanding risks in key areas in an orderly manner and achieve a long-term balance between steady growth and risk prevention."
Judging from the volume of pledged repo transactions in the high-frequency interbank market in August, especially the overnight pledge volume, the leverage demand represented by it has not shrunk significantly due to the recent high capital price. In the previous report "Reverse repurchase password: 90% of 3.5 trillion yuan-Zhou Du observes the money market and liquidity No.22 in 2020", we pointed out that the overnight pledge of 3.5 trillion yuan is an important observation index for the central bank to carry out reverse repurchase operations from late May to early July. The data shows that the ratio of R00 1 pledge transaction has remained below 90% since mid-August, but the transaction volume has remained between 3.4 trillion yuan and 3.5 trillion yuan, exceeding 3.5 trillion yuan in several trading days. At this time, the central bank prolongs the operation period or releases policy signals, which is intended to reduce the liquidity risk that may be caused by financial institutions in the process of rolling short-term funds, so as to achieve the purpose of preventing risks.
Second, slightly lengthen the reverse repurchase period or have the consideration of guiding market expectations.
In August, the central bank continued to overspend MLF and restart 14-day reverse repurchase for seven consecutive days from the 7th. On the one hand, it can smooth the fluctuation of funds, on the other hand, it objectively raises the marginal cost of the central bank's investment. Although the proportion of 14-day reverse repurchase is not high, and the overall capital cost is not significantly increased, the derivatives market is sensitive to it.
In terms of term bonds, the decline of treasury bonds futures deepened across the board after the resumption of reverse repurchase on 2 1 and 14. 26th 10 main contract closed at 97.7 1 yuan, 5-year main contract closed at 99.6 1 yuan, and 2-year main contract closed at 100.20 yuan. In terms of interest rate swap, the interest rate swap between FR007 and Shibor 3M rose by more than 1 0bps from September 9 to 26/year, both of which rose to the pre-epidemic level, indicating that the market is cautious about the future monetary policy orientation, and similar market concerns also appeared in September 20 16.
3. Inter-bank liquidity maintains a tight balance, and the interest rate of funds may have upward risks.
On the one hand, under the current monetary policy environment, the liquidity of this 14-day reverse repurchase restart is obviously different from that of 20 16 in August. At that time, the central bank not only restarted the 14-day reverse repurchase operation, but also restarted the 28-day reverse repurchase operation. The operation volume of 14-day reverse repurchase and 28-day reverse repurchase was no less than that of 7-day reverse repurchase. At the same time, the central bank has invested a lot of medium and long-term liquidity through higher-cost MLF, and the balance of MLF has risen rapidly from 2 trillion to more than 4 trillion. Therefore, from 2065438 to August 2006, the central bank's "short-term and long-term" was comprehensive, which led to a rapid increase in the marginal capital cost of the central bank. In August 2020, the scale and frequency of reverse repurchase have been significantly enlarged. As of the 28th, the weighted days of reverse repurchase in that month were 17 days, and the net scale of reverse repurchase was 580 billion yuan, both higher than the same period in the past three years. MLF was launched in August, but the net launch scale was only 654.38+050 billion. Generally speaking, under the moderate adjustment of the total amount, the liquidity is more "short". In August, the central bank increased the amount of reverse repurchase, or raised the low level of total liquidity and excess reserve rate to "normal", but the short-term reverse repurchase operation mainly increased the total liquidity or increased the fluctuation of interest rate of funds, making the funds more fragile. In the context of the significant extension of the asset delivery cycle of commercial banks, the restart of 14-day reverse repurchase may more reflect the signal significance that the marginal tightening trend of monetary policy remains unchanged.
On the other hand, the current monetary policy does not have the basis for comprehensive tightening, which can also be seen from the recent statement of the central bank. According to the economic data, the unemployment rate that the current policy makers are very concerned about is 5.7%, which is still higher than the target level of 5.5%. The employment base needs to be consolidated. Although the economic recovery has been further consolidated, the recovery slope has decreased and the structure is still unbalanced. Residents' consumption continues to be sluggish, and it will take time for the economic growth rate to return to the potential growth level, which is quite different from the situation in 20 16. From the perspective of supporting the real economy, this year's financial system profit target10.5 trillion has not been completed. If the overall tightening of monetary policy pushes the bond interest rate up sharply, it may affect the realization of cost reduction and profitability in the second half of the year.
Finally, it should be pointed out that with the passage of time, the economic growth rate in the second half of the year will gradually approach the potential economic growth rate, and with the achievement of the profit target, the marginal trend of interest rate of money market funds will become more obvious under the idea of "improving cross-cycle design and adjustment". The data shows that in August, the key interest rate DR007 has been running above the policy interest rate of 2.20% for several consecutive trading days, and the NCD interest rate of the medium and long-term pricing center bank 1 year has also exceeded the MLF interest rate of 1 year by 2.95%, which indicates that the central bank's tolerance for the sudden increase in capital interest rate has improved.
Two. Liquidity resumed in August
Since mid-August, the central bank has greatly increased its liquidity in the open market due to the incremental issuance of local special bonds and the mid-month tax period. However, since the end of August, the funds have been significantly tightened. DR007 fluctuated around the policy interest rate of 2.20%, and overnight rate hit a new high every month in the year, which aggravated the liquidity stratification.
In terms of liquidity scale, in August of 17, the central bank operated MLF of 700 billion yuan 1 year, exceeding150 billion yuan, which reversed the operating law of MLF shrinkage in the first four months. Treasury bonds deposits were fully hedged and the scale of reverse repurchase increased. As of August 28, the central bank has invested 580 billion yuan, but the funds are still tight. The weighted capital price of DR007 has been running above the 7-day reverse repurchase policy interest rate of 2.20% for several consecutive trading days since the 7th, and further increased to 2.32% on August 28th, exceeding 2.30% for the first time since the beginning of February. The upward trend of overnight capital prices is more obvious. By 28th, the monthly average values of DR00 1/R00 1 were 1.99% and 2.05% respectively, both exceeding the level of 1 this year and 5bp higher than that before the epidemic.
At the same time, capital stratification has obviously intensified. The inter-bank R007 weighted fund price rose to 2.57%, at 2 1, and further rose to 2.59% on 25th, with the upward range exceeding 20bps. The spread between R007 and D007 once expanded to nearly 40 basis points, setting a new high since the beginning of April.
At the end of the month, with the slow release of the central bank and the release of financial funds, the funds were loosened. DR007 has fallen below 2.20%, but the capital stratification has not been alleviated, and R007 is running at a relatively high level above 2.40%.
The low over-reserve rate of the banking system is one of the main reasons for the fragility of funds in August.
In the first quarter of this year, in response to the impact of the epidemic on the economy and financial markets, the central bank released a large amount of low-cost liquidity by directionally lowering the deposit reserve ratio and refinancing rediscount tools. At the end of the first quarter, the over-storage rate of the banking system reached 2. 10%, which was much higher than the level of 20 17 to 20 19 at the end of the first quarter 1.30%. However, in the second quarter, the central bank continuously used short-term funds to replenish liquidity, and the over-reserve ratio at the end of the quarter dropped to 1.6%, slightly higher than the 1.4% at the end of the second quarter of 20 17, which was basically the same as the average level from 20 17 to 20 19. According to the balance sheet data of the central bank in July, the reserve deposits of deposit-taking companies fell by more than 1. 1 trillion yuan in July. Considering that the decline in the payment base in July has brought about a certain decline in the scale of the statutory reserve, the over-reserve ratio in July may be further lower than that in June, or roughly equivalent to 20 17 in the same period in history, which is at a historical low. According to the five-factor model [3], the central bank's net withdrawal from March to July this year is about 1.04 trillion yuan, or it is the core factor of the current low excess reserve ratio. Therefore, the total liquidity has been continuously contracted by the central bank at the end of July, or it has fallen to a historical low, which is the background of the "tight balance" of funds in August.
In the context of the decline in the over-reserve ratio, the low total liquidity may have two main effects on the capital surface: First, the level of institutional reserve is generally low, the ability to resist the fluctuation of capital price is weak, and the balance of capital surface is very fragile. In the event of unexpected factors, the amplification of reserve demand will lead to the reduction of financing supply and the surge of integration demand, which may significantly amplify the fluctuation of funds. Second, the excess reserve rate will affect the ability of the central bank to regulate the interest rate of funds. In the case of "relative shortage" of inter-bank liquidity, the demand gap of institutional reserve needs the funds of the central bank to meet, which will be very sensitive to the cost of incremental liquidity of the central bank.
In August, the price of NCD was still in the upward channel, and the national stock banks were still raising prices slightly, but the overall upward slope slowed down. As of 28th, the issuing rate of NCD of 1 year joint-stock bank has risen to above 3.0%, which has exceeded the operating rate of 1 year MLF of 2.95%. The background is related to the "relative shortage" of overall liquidity between banks and the change of pressure structure at the debt end of banks. Judging from the changes in the scale of structured deposits, in July, the structured deposits of large banks continued to decline, shrinking by 7.25% from the previous month to 36.44%, while the scale of structured deposits of small and medium-sized banks decreased relatively, shrinking by 5.34% from the previous month, accounting for 63.56%, which was slightly different from the situation in which small and medium-sized banks were under great pressure. Large banks are the main providers of liquidity in the interbank market, and their reduced willingness to lend has a greater impact on the capital side. The structural adjustment of the bank's own debt side, the decrease in the growth rate of general deposits and the increase in the growth rate of short-term non-bank deposits have also promoted the upward interest rate of medium and long-term funds. In addition, it is worth noting that, from the shape of the capital interest rate curve, in the current upward cycle starting in early July, the price of NCD with a term of 1 month is relatively small compared with that with a term of more than 3 months, and it may face the risk of "covering the decline" in the future.
In terms of bill interest rate, the trend of bill interest rate was relatively stable in August, and the discount rate of three-month state-owned banks' bills was basically between 2.65% and 2.75%. At the end of the month, the demand for enterprise-side payment and settlement increased, the primary market issuance increased, the demand for institutional scale adjustment was released, and the marginal interest rate of bills rose.
Three. September liquidity outlook
Looking forward to September, under the monetary policy orientation of moderate aggregate and price, in addition to the continuous disturbance of national debt supply, structural deposit governance and financial direct access to the grassroots will also affect the debt structure of the banking system. However, on the whole, the central bank's idea of maintaining the stability of funds has been emphasized again. Fiscal expenditure is of positive significance to liquidity replenishment, and the interbank liquidity environment is likely to maintain a "tight balance".
In terms of monetary policy, the maturity of reverse repurchase at the beginning of the month is relatively large.
The scale of reverse repurchase in September was large, concentrated in the first half of the year, and the reverse repurchase due in June-March exceeded 654.38 billion yuan. Generally, at the beginning of next month, the funds are relatively loose, disturbed or relatively small; In terms of medium and long-term liquidity maturity, the MLF of 200 billion yuan will expire on June 5438+07, so it is possible to continue to exceed the amount when the medium and long-term funds in the banking system are relatively short. However, MLF lacks the motivation of large-scale increment under the moderate adjustment of total amount, or it is more reflected in balancing medium and long-term liquidity with refinancing. It is expected that the central bank will still need to protect the funds through open market operations before the financial funds are put into use in September.
In addition, the statutory deposit reserve naturally increases with the growth of general deposits, forming a rigid gap in liquidity. Specific to the monthly changes of general deposits, there is an obvious seasonal trend. Historically, the growth rate of general deposits in September was basically the same as that in August. With the slowdown of credit growth in July, the growth rate of general deposits decreased correspondingly, basically returning to the level near the same period in history. Considering that the policy layer emphasizes that the pace of credit supply will slow down in the second half of the year to match the pace of economic recovery, and it is expected that the change of general deposits will be close to seasonal law in September, then the change of government deposits will mainly affect the payment base, and the demand for statutory reserves may increase.
In terms of finance, it is expected that there will be a large space for fiscal expenditure in September, or it will form a positive supplement to liquidity, but the supply disturbance of national debt will continue.
In terms of tax payment, the tax payment scale in September was basically the same as that in August, with an average of 692.5 billion yuan in the past four years, which was a small tax payment month compared with the whole year. With the consolidation of the recent economic recovery, the tax payment scale in July has returned to the same level of last year, turning positive year-on-year. It is expected that the scale of tax payment in September will be close to the seasonal law, which will bring certain time pressure to the fund side.
In terms of payment, the fiscal deficit of the NPC and CPPCC this year increased by 1 trillion yuan compared with last year, and the special anti-epidemic national debt was added by 1 trillion yuan, and the local special bond was 3.75 trillion yuan. The net financing scale of national debt for the whole year was about 85 1 trillion yuan. Previously, in order to make room for the market-oriented issuance of special anti-epidemic government bonds, the issuance of general government bonds and local government bonds decreased significantly in June and July. On July 29th, the Ministry of Finance issued the Notice on Accelerating the Issuance and Use of Local Government Special Bonds, requiring that the issuance of special bonds be completed before the end of 10. As of August 28th, the data shows that from September to 10, the net financing of local government bonds (including special bonds and general bonds) was about 3.77 trillion yuan [4], and the remaining was about 0.96 trillion yuan. It is expected that local government special bonds will still maintain a certain issuance intensity in September. The net financing of general treasury bonds (including special treasury bonds) is about 2 trillion yuan, and the remaining 1.78 trillion yuan is to be issued. The issuance of treasury bonds may increase in September, which will disturb the capital.
In terms of fiscal expenditure, September is a big month for fiscal expenditure over the years. Judging from the changes of government deposits in the balance sheet of the monetary authorities, historically, the government deposits in September mainly decreased month-on-month, but the magnitude was lower than that in August, with an average of--3 105 billion yuan in recent four years, which may be a supplement to the base currency. Judging from the recent expenditure rhythm of special national debt, this year, through the establishment of a special transfer mechanism, the funds of special national debt for epidemic prevention will go directly to the grassroots level of cities and counties, and the funds will be quickly implemented in the project. "As of July 30th, 1 trillion special anti-epidemic treasury bonds have all been issued. Among them, 5 105 billion yuan has been implemented in the 24 199 project, which is mainly used for infrastructure construction and anti-epidemic related expenses "[5], which is also the main reason why the fiscal expenditure in July this year was significantly higher than that in the same period in history (on the other hand, the fiscal expenditure budget this year was larger than that in previous years, but the fiscal expenditure in the first half of the year was relatively slow). However, there may be a certain time lag from the issuance to the use cycle of special bonds. It is estimated that the proportion of fiscal expenditure in September will be higher than the average level in previous years, which can not be ignored.
Judging from the currency issuance and foreign exchange holdings, the National Day holiday may cause great changes in the currency issuance in September, which will disturb the funds, and the foreign exchange holdings may have little impact.
The central bank's debtor's currency issuance consists of cash in circulation (M0) and cash on hand in the bank. Affected by the epidemic, the speed of cash returning to banks dropped significantly in the first half of this year, but M0 increased by 40.8 billion yuan in July, which may mean that the cash returning process has ended. It is estimated that the month-on-month change of M0 from August to 65438+February will be close to the historical seasonal law. Historically, the change in the scale of currency issuance in September was related to the National Day holiday, or it had a certain disturbance to the interbank liquidity level.
In terms of foreign exchange holdings, foreign exchange holdings have not changed much since 20 17. Due to the current high interest rate difference between China and the United States, and the domestic economic recovery is faster than that of the United States, the RMB may fluctuate slightly within a certain range in September, and the foreign exchange account has little impact on the funds.
note:
[1] Guo Shuqing, August, 2020 16, unswervingly fighting the tough battle to prevent and resolve financial risks, seeking truth from facts,/Xinwen/2020-08/16/content _ 5535190.htm.
[2] On August 2 1 day, DR0 14 increased by 10bp compared with the 20th due to cross-month factors.
[3] Using the identity of "total assets = total liabilities" in the central bank's balance sheet, excess deposit reserve ≈ foreign exchange holdings+creditor's rights to other deposit companies-government deposits-currency issuance-statutory deposit reserve, we can see that the excess reserve level is mainly related to five factors: foreign exchange holdings, central bank's open market operation, government deposits, cash in circulation and statutory deposit reserve.
[4] According to the data of the Ministry of Finance, from June to July, the accumulated special debts and general debts of local governments were about 2.27 trillion yuan and 0.56 trillion yuan respectively. According to Wind's statistics, local special debt and general debt increased by about 94 million yuan in August, so the total was about 3.77 trillion yuan.
[5] Issued 1 trillion yuan of special treasury bonds, with more than half of the funds implemented. On August 65, 2020, at 438+00, China Business News, Fenghuang. com: /c/7yokQW7kFp7.