Sudden "money shortage"! Overnight rates soar to 50%! What happened?

On the last day of the month, there was a sudden "money shortage"!

On the afternoon of October 31, the market capital tightened sharply, and interest rates soared.

Overnight rates have soared from around 3% in the morning, 3% - 10% - 20% - 50%; The two-day interest rate is the same, from 2.5% - 10% - 20% - 30%.

This kind of money shortage, although everyone is psychologically prepared, but the extent of the money shortage is still a little unexpected!

1. At the market level, in order to close their positions, non-bank institutions stampede and borrow money regardless of cost.

On the last trading day, everyone thought it was the same as before.

In the morning, the capital side did not show much signs of tightness, and the overnight interest rate was still around 3%.

But in the afternoon, the situation began to change, especially at two o'clock in the afternoon, everyone suddenly realized that there was a shortage of money.

From 3 p.m., to 4 p.m., to 4:30 p.m., a large number of non-bank institutional positions still have not been closed.

Seeing that the system was about to shut down, traders began to despair and look for money everywhere.

For example, the fund asks for help, 25% of the cost is borrowed overnight, and the interest rate bond is pledged; Non-bank, national stocks overnight, trading to 40%; Insurance asset management asks for help, any price borrowed overnight, pledged certificates of deposit...

The overnight interest rate jumped from 3% to 14%, then 20%, 30%, and the trader's despair could be felt when looking at the chat history, and finally even said that as long as the money was found, the cost was negligible.

If you can't borrow money, the leverage is too large, and the result is liquidation.

When everyone was borrowing money intensively, a stampede appeared, causing interest rates to skyrocket.

2. Cross-month factor.

At the end of the year, the end of the quarter, and the end of the month, it is a traditional shortage of funds, and various financial institutions are withdrawing funds.

3. Trillions of national bonds are issued, and the blood draw is too serious.

Based on past experience, it is more likely to be a shortage of money in October, because the issuance of local government bonds will start at the end of October after the early approval of local government bonds.

This year is even more special, special refinancing bonds + additional issuance of national bonds + early approval of local bonds at the same time.

1. The central government will issue an additional 1 trillion yuan in treasury bonds, all of which will be handed over to local governments for water conservancy construction.

2. The new local government bonds of 2.7 trillion yuan were issued ahead of schedule, allowing local governments to borrow new debts to repay old debts.

3. As of October 31, 2023, 24 provinces across the country have issued special refinancing bonds in October, with a scale of over one trillion yuan.

As we said before, the issuance of treasury bonds of several trillion yuan at every turn must be taken over by financial institutions in the market.

As a result, a large part of the funds in the market will be sucked away, and this part of the funds will be handed over to the issuers of treasury bonds to manage.

4. Didn't wait for the RRR to be cut

Since the large-scale issuance of treasury bonds was finalized, the market has begun to expect to ease monetary policy, cut the reserve requirement ratio and interest rates, provide liquidity to the market, and protect the cost of funds.

Unfortunately, before the policy came, the "money shortage" began to appear.

What's more, after the National Day, the central bank has also been recovering funds through reverse repo.

For example, the central bank carried out a 7-day reverse repurchase operation of 200 billion yuan, 20 billion yuan, 20 billion yuan and 67 billion yuan on October 7 ~ 10, considering that a total of 1,522 billion yuan of reverse repurchase expired in the same period, the central bank withdrew 1,215 billion yuan through the open market in 4 days.

5. Worried about the depreciation of the exchange rate, dare not relax the monetary policy.

You may ask, if there is an expectation, why not ease monetary policy in advance?

The reason is simple, that is, I am worried about the intensification of the pressure of RMB depreciation.

The renminbi is now trading at around 7.33 against the dollar.

It has almost reached the bottom line of tolerance for the RMB, which used to fall below 7.34, and the regulator would take action, and basically smashed real money.

Therefore, we can often see that once the exchange rate falls below 7.34, even if the dollar index is rising, the RMB exchange rate will fall, and the divergence between the two is behind the "intervention".

Therefore, for the sake of the stability of the RMB exchange rate, we do not dare to relax the currency without any scruples, but on the contrary, we will tighten the currency.

Further questioning, why not let the RMB exchange rate depreciate?

The reason is also very simple, worry about capital outflows.

6. Banks are reluctant to lend money, and non-bank institutions are in a hurry.

Since banks are responsible for the main bond financing, they are no longer willing to lend money to non-bank institutions, and at the same time, they have to get back the money they have lent before.

For example, from October 23 to 27, the banking system averaged 3.3 trillion yuan per day, down from 3.6 trillion yuan the previous week. In particular, it was still at a low level of around 2.6 to 2.7 trillion yuan from last Monday to last Tuesday.

How do you evaluate this money shortage?

This is a completely "accidental" event, the money shortage will certainly not last, and it is expected that the central bank will soon cut the reserve requirement ratio to ease the liquidity crunch problem, so there is no need to panic excessively.

However, it is necessary to pay attention to the depreciation pressure of the RMB exchange rate.