On the morning of May 22, the National Interbank Lending Center authorized by People's Bank of China to announce that the loan market quotation rate (LPR) on May 22 was:
The LPR for 1 year is 3.65% and the LPR for LPR over 5 years is 4.3%.
The above LPR is valid until the next LPR is issued.
The data shows that since the asymmetric downward revision of the LPR in August 2022, the LPR has been "standing still" for eight consecutive months.
The LPR quotation in May was unchanged, which was stable for the ninth consecutive month.
Prior to this, the central bank launched a 125 billion yuan MLF operation on May 15, and the amount of MLF due this month was 100 billion yuan, which means that the central bank implemented a net investment of 25 billion yuan this month.
The May MLF operating rate was 2.75%, unchanged from the previous month.
As the interest rate anchor of LPR, the MLF rate remained stable in May, making the probability of LPR cuts this month significantly reduced.
The data shows that since the LPR reform in August 2019, the 1-year LPR has been lowered 8 times by a cumulative reduction of 66bp, and the varieties with a period of more than 5 years have been reduced by 55bp 6 times.
Among them, May 2022 is the only time that the variety with a maturity of more than 5 years has been reduced separately;
Since 2022, LPR quotations with a maturity of more than 5 years have been lowered three times, with a cumulative reduction of 35bp.
LPR is not moving, how to understand and interpret?
1
Basic Review: The definition and meaning of LPR and its relationship to economic reality
LPR is commonly known as "loan base rate" and features:
1. People / enterprises with different qualifications find banks to borrow money, and the interest rates provided by banks are also different.
2. It is reported by 18 banks, re-reported on the 20th of each month, and announced after calculation on the same day, which is equivalent to the "aunt's day" of the loan interest rate on the 20th of each month.
The old mechanism is easy to be over-interpreted by the market, thus biasing the economic trend.
The new mechanism (LPR) can maintain price stability and reduce the probability of inflation, which is a more scientific and accurate "weather vane", "compass" and "navigation".
Since the beginning of 2020, the interest rate of Chinese loans has been changed from the previous calculation method of rising the benchmark interest rate to the method of LPR plus points.
According to the announcement of the People's Bank of China in early 2020, it is required that the conversion of the pricing benchmark of existing floating rate loans for housing loans should be completed by August 31, 2020 in principle.
LPR, that is, Loan Prime Rate (LPR), is a basic loan reference rate calculated and announced by the National Interbank Lending Center authorized by the People's Bank of China according to the Bank's loan interest rate for the best quality customers, in the form of an open market operation interest rate (mainly referring to the medium-term lending facility rate) plus points, and each financial institution should mainly refer to LPR for loan pricing.
LPR, replacing the original fixed interest rate, has become the new rule of China's financial market and monetary environment:
There are two types of LPR in China:
short-term (1-year) linked consumption and liquidity;
Long-term (more than 5 years) correlation is a mortgage.
2
LPR has been "standing still" for 9 consecutive months, what kind of signal has it released?
LPR quotations remained unchanged in May, in line with market expectations, mainly due to the fact that the medium-term lending facility (MLF) operating rate in the month was not adjusted and the LPR quotation base was stable.
At the same time, the net interest margin of commercial banks fell to 1.74% at the end of the first quarter of 2023, a sharp decline of 0.17 percentage points from the end of the previous quarter, a decrease equivalent to the level of the whole year of 2022, with a large downward range, and hit the lowest point on record.
As a result, although market interest rates such as the yield to maturity of interbank certificates of deposit have fallen rapidly recently, and some banks are also lowering deposit interest rates, it is still difficult to offset the pressure caused by the sharp narrowing of net interest margins, and the current stage of quotation banks to compress LPR quotation points is insufficient.
Objectively speaking, the so-called economists and opinions that shouted about the reduction of national interest rates were once again slapped in the face.
However, from another point of view, LPR maintains policy concentration, combined with the actual needs of the economy, the central bank may rely more on structural monetary policy tools to achieve "targeted interest rate cuts", while reducing costs, taking into account structural adjustment, and achieving differentiated and precise support.
For example, under the principle of "advance and retreat", in January 2023, the central bank set up two new real estate policy tools, namely 80 billion yuan of special re-loans for housing enterprise relief and 100 billion yuan of rental housing loan support plan, for projects and loans that meet the requirements, the central bank will provide financial support according to 50% of the actual investment funds and 100% of the loan principal, with interest rates of 1.75%, helping to stabilize real estate and promote transformation with low-cost funds.
The dynamic adjustment mechanism of the first set of housing loan interest rate policies introduced at the beginning of the year also stabilizes the smooth operation of the real estate market, increases the precision of property market regulation and control, and avoids obvious uneven hot and cold phenomena in various places.
LPR remains unchanged and the economic reality demands, then it puts forward requirements for the state to carry out targeted precision irrigation and blood transfusion to specific fields and industries.
If there is no scale effect, then it is necessary to pursue efficiency effect.
This is perhaps the most important signal for LPR to stand still.
3
Trend research: What are the possible trends of China's LPR next, and what kind of impact will it have?
In fact, judging from the interest rate differential of China's current banks, there is not much imagination for the subsequent LPR reduction:
At present, the net interest margin of commercial banks has further narrowed rapidly to a historical low of 1.74%, which has been in a warning area, which has eroded the sustainable operation of the banking industry, continued to yield profit to the physical space and the ability to prevent and resolve risks.
The important factor that triggered the subsequent rate cut remains the sustainability of the economy and financing repair.
If the slope of consumption recovery is less than expected, the real estate chain continues to be difficult to achieve a virtuous circle, the long-term investment momentum is weak, private investment continues to decline, and the credit recovery of the residential sector recurs repeatedly, etc., the possibility of a slight interest rate cut may still be ruled out within the year.
However, the continued reduction of LPR will mainly depend on the performance of bank interest margins.
In addition to relying on the reduction of the policy interest rate, the most important thing is to match the improvement of the debt side to ensure that the net interest margin of banks remains at a relatively stable level.
So, rational prediction:
In the coming period, the probability of LPR will remain unchanged, and the interest rate of newly issued general loans and corporate loans may stabilize at about 4.50% and 4%, and the downward range is not expected to be too large.
On the deposit side, it is expected to reduce deposit costs by further guiding banking institutions to reduce the spread of time deposits, control the renewal scale of high-cost time deposits above 3Y (year), set the threshold of demand-like deposits, correct interbank deposit hedging agreement deposits, and include the return of structured deposit options in the assessment of self-discipline mechanisms, so as to jointly promote the net interest margin and performance of banks from both ends of the capital and negative ends.
There is a logic here, that is, there is still room for the deposit rate to fall, but the LPR already has obvious bottoming characteristics.
The current intention of the overall financial rule environment is very obvious, that is, to squeeze the savings solidified in fixed deposits into the economic environment and increase liquidity in the economic environment.
More importantly, the deposit interest rate has been lowered, and many people have a misunderstanding, thinking that let the people's deposits suffer, in fact, how liquid can the deposits of ordinary people have?
The core purpose of reducing the deposit interest rate is to break the idling situation of funds in the current Chinese financial environment, so that the situation and inertia of large funds lying on asset appreciation can be improved.
What overnight lending, interest deposit these financial arbitrage tools that ordinary people cannot touch, if the deposit interest rate continues to fall, is it difficult to let the bank cut meat and give profits?
Another aspect, ask a question for everyone to think about:
Everyone thinks that with the economic upswing and the market hot, what kind of attitude should the state have towards loan interest rates?
The LPR remains unchanged, which is also an expression of attitude, and the country can stabilize the current needs of China's economy.
How should ordinary people see the main line and guide action?
At present, the economy has turned into a process of recovery, but the foundation is still not solid, and it is necessary to continue to keep the credit cost of market entities low in the short term to create a favorable monetary and financial environment for economic repair.
The recently released "Monetary Policy Implementation Report for the First Quarter of 2023" (hereinafter referred to as the "Report") proposed for the first time to "maintain a reasonable and moderate interest rate level", and continued the expression of the People's Bank of China Monetary Policy Committee's regular meeting in the first quarter of 2023 to "promote the steady reduction of comprehensive financing costs and personal consumer credit costs for enterprises".
The "Report" pointed out in the column that in the next stage, the People's Bank of China will continue to implement a prudent monetary policy, reasonably grasp the level of macro interest rates, continue to further promote the market-oriented reform of interest rates, and improve the transmission mechanism of "market interest rate + central bank guidance →LPR → loan interest rate", so as to create favorable conditions for promoting the effective improvement of quality and reasonable growth of the economy.
The main line of stability remains unchanged, so how to combine the rule environment for ordinary people and ordinary groups to guide action?
A few points of view:
1. There is no dispute that there is debt leverage, follow the principle of interest rate differential, and now is the most appropriate stage to repair personal and family balance sheets.
2, even if China's deposit interest rate continues to fall, it is still in the considerable bracket from a global point of view, so from the perspective of individuals and people, do not care about selling anxiety views and statements, do not consider any inflation rhetoric, it is necessary to maintain saving habits before economic uncertainty and confidence consensus have been restored.
3, the increase in LPR is an economic signal worthy of attention, the economy is up, the country has the confidence and motivation to raise interest rates.
Considering the lag of currency operation, as long as the LPR rises, then what kind of entrepreneurship, investment, expansion of business, loan to buy a house, etc., is meaningful.
Instead of talking to some so-called economists about the LPR downward, it is a good opportunity to buy a house, typical misleading people's children and bringing people into the pit.
This is the simplest, most pragmatic, and suitable economic theory for China.
Staying sensitive to economic trends and following changes in economic policies and rules are the basic cognitions and habits necessary to achieve survival and development in any economic environment.
Probably based on these analyses, LPR remains unchanged, the country has national considerations, and at a time when the property market has clearly turned sluggish and deserted, such a standstill may be an important attitude expression.