With the release of credit data in November, many institutions have increased their expectations for RRR and interest rate cuts. In the money market, there have been signs of easing in the recent tight funding situation, and the funding rates of various maturities have fallen.
However, on the whole, the New Year's Eve funds are still tight. Since December, while the funding rate has risen, the interest rate of 1-year NCD (interbank certificate of deposit) has been inverted with the interest rate of 10Y treasury bonds, and the interest rate of 3M and 6M NCD has been inverted with that of 1-year varieties, which has attracted more attention from the market.
The shortage of funds and the "impulse" of banks hoarding quotas for next year's good start have also led to the intensification of the contradiction between supply and demand of bills, with the rediscount rate of bills reappearing at "zero interest rate" since December, and the rediscount rate of 3M bills hitting a new low since 2020.
In the face of the increase in the supply of government bonds, the continued tightness of interbank funds, and the weak demand for physical financing, many institutions expect a RRR cut in the fourth quarter of this year, but as the end of the year approaches, this expectation has gradually shifted to the first quarter of next year. In the short term, the market is still pinning its hopes on the central bank to increase the net supply in the open market and the excess renewal of the MLF (medium-term lending facility).
The funding rate has fallen, and the tension is still there
Judging from the performance of the money market on December 14, among the pledged repo rates, the weighted average interest rate of DR001 was reported at 1.62%, DR007 was reported at 1.82%, and DR014 was reported at 2.18%, of which DR007 rebounded slightly from the previous day, and DR001 and DR014 continued to fall from the previous day.
On the 13th, the capital side began to show signs of marginal loosening, and the funding rates of various maturities generally declined. Among them, the Shanghai Interbank Offered Rate (Shibor) fell 12.7 basis points overnight to 1.63%, and the 7-day Shibor fell 5 basis points to 1.79%. At the same time, DR007 fell to 1.83%, and the SSE 1-day Treasury reverse repo rate (GC001) fell to 2.206%. On the same day, the yields on short-term bonds and certificates of deposit in the market also fell sharply.
The shift in the capital market may be related to changes in policy expectations. According to the latest financial data disclosed by the central bank on the same day, RMB loans increased by 1.09 trillion yuan in November, a year-on-year decrease of 136.8 billion yuan, maintaining reasonable growth in the context of the in-depth promotion of risk prevention in key areas. However, from a structural point of view, the medium and long-term loans of enterprises and residents still perform poorly, and the characteristics of short-term loans and bill impulse of enterprises still exist. At the same time, the growth rate of M1 fell to a record low in November, and the scissor gap between M2 and M1 further widened.
In this regard, institutions generally analyze that the current phenomenon of insufficient credit demand and corporate capital vitality still exists, and the necessity of RRR and interest rate cuts has increased. Chen Jianheng, a fixed income analyst at CICC, pointed out that it is still necessary to reduce the real interest rate to promote money circulation, and the loose monetary policy will continue.
Since December, the funding rate has risen slowly, and DR007 has remained above the policy rate (1.8%) for most of the time, with a maximum of close to 1.9%, while the interest rate of medium-term repo varieties has risen significantly. During the same period, the yield to maturity and the issuance interest rate of interbank certificates of deposit of various maturities generally rose, the interest rate of 1-year NCD and 10-year treasury bonds were inverted, and the interest rate of 3M and 6M NCD was inverted with that of 1-year varieties, of which the interest rate of 1-year certificate of deposit reached a new high in the year.
Ni Jun, a banking analyst at GF Securities, pointed out that the interest rate on funds due during the year fluctuated in a narrow range, but the interest rate on cross-year funds rose significantly. In addition, from the perspective of the maturity structure of interbank certificates of deposit, the scale of 3M and below certificates of deposit accounts for as much as 54%, and he believes that it is expected that the banking system will make cross-year liquidity reserves.
According to the analysis of a person from the bank's bond investment department, the convergence of funds since August may be partly the effect of the central bank's policy intentions, and the original intention may be the gradual normalization of monetary policy after the epidemic. However, Wang Jian, chief analyst of the financial industry at the Guosen Securities Economic Research Institute, suggested that interest rate fluctuations that have not caused excessive distortion in market pricing in the short term should not be regarded as having monetary policy implications. He pointed out that in the actual transmission of market interest rates, many seasonal factors and random factors will bring short-term fluctuations in interest rates, and to a certain extent, the market activity brought by fluctuations also helps price discovery. Therefore, in order to reduce the cost of policy, the monetary authority will not intervene excessively to keep interest rates at very low volatility.
If the central bank does not cut the reserve requirement ratio or renew the MLF in a large amount (650 billion yuan of MLF will expire next Friday), it is expected that the upward trend will not peak this year. Ni Jun pointed out that although the payment of government bonds this week has fallen from last week, considering the pressure of tax payment, it is expected that the central bank's open market will return to net injection. Looking back at last week, the central bank withdrew about a trillion yuan of funds in the open market.
Ming Ming, chief economist of CITIC Securities, pointed out that from a short-term perspective, it is expected that the scale of treasury bond issuance in December needs to reach about 1.1 trillion yuan, and the issuance pressure in the first quarter of next year may be higher, and the pumping of government bonds on the liquidity market may continue. In terms of long-term trends, the new capital regulations have raised the risk weight of NCDs with maturities above 3M, and the central bank has recently emphasized "keeping a good eye on the general gate of money supply", and there are still uncertainties about the impact of regulation and currency on the interest rate of certificates of deposit. From a historical point of view, it is expected that whether the subsequent quantitative monetary easing can be increased or become the key to the easing of inversion.
On December 14, the central bank carried out a reverse repurchase operation of 262 billion yuan in the form of interest rate bidding, and due to the expiration of 363 billion yuan of reverse repurchase on the same day, the net withdrawal of 101 billion yuan in the open market. Throughout this week, the central bank has accumulated a net injection of about 346 billion yuan through open market operations.
Bill transfer discount reappears "zero interest rate"
Liquidity tensions have also been transmitted to the bill market. Since late October, the rediscount rate of 3M bills has basically fluctuated around 0.5%, and since December, the rediscount rate of 1M bills has fallen back to around 0. According to the latest data from Wind, the 3M bank transfer discount rate has fallen to a new low of 0.15%.
Ni Jun believes that this shows to a certain extent that banks have been hoarding quotas in advance for January next year since October, and the supply of undiscounted New Year's Eve bills is insufficient, and this phenomenon may continue until the end of the year.
Some institutional sources told reporters that the recent performance of bill interest rates is affected by seasonal factors, but it is more affected by the interest rate of the capital market. "Bills are often priced with reference to the price of monetary funds. When interest rates rise in the capital market, so does the cost of discounting bills, which can lead to companies reducing their financing for discounting bills, and vice versa. As an important part of the money market, the bill market is more sensitive to changes in money market funds, because the risk of bond repurchase is low, and the bill rediscount rate is generally higher than the bond repurchase rate, and the trend of the two is generally the same. The person noted.
Because of the binary nature of "capital + credit", the bill rediscount rate, especially the short-term rediscount rate, is regarded as an important leading indicator of credit delivery. Wang Yifeng, chief financial analyst of Everbright Securities, pointed out that the inversion of bill interest rates and funding rates reflects to a certain extent the rising demand of institutions for cross-year bill discounting, the demand for physical financing still needs to be repaired, and some institutions still have the situation of collecting bills and hedging under the policy drive.
Judging from the recent situation learned by the first financial reporter, the credit demand of the banking industry has not yet shown a significant recovery. A number of bankers told reporters that in accordance with the law of "good start", banks, especially large state-owned banks, will reduce the speed of credit delivery at the end of the year to reserve projects until the beginning of the following year. However, from this year's point of view, a number of bankers said that the primary consideration at present is no longer "pressure", but how to complete this year's credit target.
However, Ni Jun pointed out: "On the one hand, the zero interest rate of bills in December is due to the lack of willingness of branches to invest due to excessive credit front-loading this year, and on the other hand, due to the smooth credit rhythm in the first quarter of next year under the guidance of supervision, the head office will bear the burden of buying bills and hoarding quotas." Credit demand may not be as good as the recent downturn in real estate, but it's not as bad as the zero interest rate on bills has been shown in the past. ”
In this context, coupled with the just-held Central Economic Work Conference to set the tone of monetary policy to be "flexible and moderate", the market is generally expected to cut the RRR and interest rates in the future. Prior to this, many institutions predicted that there would be a RRR cut within the year, and as the end of the year approached, this expectation gradually shifted to the beginning of next year. Especially as the Federal Reserve begins to discuss interest rate cuts, some institutions believe that the next monetary policy space will be further expanded.
In addition to the RRR and interest rate cuts that are widely expected by the market, Chen Jianheng also pointed out that the current nominal interest rate in the mainland is at a low level, but the inflation level is lower, and both enterprises and residents are facing relatively high real interest rates, which is not conducive to household consumption and enterprise investment. We believe that it is necessary to reverse the current situation of high real interest rates, especially to accelerate the downward trend of deposit interest rates and reduce the cost of liabilities of financial institutions, so as to create conditions for the overall interest rate level to fall.