The central bank authorized the National Interbank Funding Center to announce that the LPR remained unchanged in April. Approaching the May Day holiday, the interbank Shibor overnight interest rate has continued to rise recently, and the annualized interest rate of many varieties of reverse repurchase of treasury bonds on the exchange is also rising.
LPR unchanged in April //
The National Interbank Funding Center authorized by the central bank to announce that the loan prime rate (LPR) on April 22 will be 3.45% for 1-year LPR and 3.95% for LPR over 5 years. This is the second month in a row that the central bank has remained unchanged since a sharp cut to the 5-year LPR in February, Wind data showed. In addition, the 1-year LPR has remained unchanged for 8 consecutive months, which shows that the probability of another short-term interest rate cut by the central bank is not large, and the overall situation remains stable.
Shibor Continues to Move Higher Overnight //
With the advent of the May Day holiday, the market demand for funds has increased, and the Shanghai Interbank Offered Rate has continued to rise recently. Wind data shows that on April 22, Shibor was last reported at 1.78% overnight, a slight retracement from the previous trading day and the second highest since March. It can be seen that the interest rate in the interbank market has risen significantly recently.
Judging from the overall trend this year, Shibor was relatively stable overnight, basically fluctuating between 1.5% ~ 1.9%, with no sharp rise and breakthrough of 2% and no sharp fall in lower interest rates. Compared with the previous three months, the minimum interest rate in April was 1.69%, which is much higher than the minimum interest rate in other months.
Exchange Treasury Reverse Repo Rate Climbs -
Towards the end of April, the annualized interest rate of reverse repo of treasury bonds on the exchange rose one after another. Wind market shows that on April 22, 17 out of 18 varieties rose, accounting for more than 90%. Among them, the annualized interest rate of the 14-day variety covering the end of the month reached 1.98%, which is the highest since April, but there is still a certain distance from the highest point of 2.715% at the end of March. It can be seen that in the reverse repurchase of treasury bonds, the annualized interest rate of the exchange was stable at the end of April, and the market liquidity was abundant.
What about the later liquidity? //
Many industry insiders expect that there is still a lot of room for the mainland to increase the implementation of monetary policy in 2024, and it is more likely to cut the reserve requirement ratio and interest rates. The PBOC will continue to reduce policy interest rates such as the MLF interest rate, guide banks to reduce deposit interest rates, promote an orderly decline in the loan prime rate (LPR), and further reduce the financing cost of the real economy.
Wen Bin, chief economist of China Minsheng Bank, pointed out that after April, the steady expansion of credit, the additional issuance of ultra-long-term special treasury bonds and the acceleration of the issuance of local bonds will cause more disturbances to the capital side.
According to the analysis of Ni Jun and Wang Xianshuang of GF Securities, April is a big month for tax payment, the central bank's open market continues to net withdrawal, the reverse repurchase balance remains low, and the MLF shrinkage continues, showing that the capital is more abundant, and the reverse repurchase balance of the central bank is expected to remain low in the next period.
Zhang Jiqiang of Huatai Securities and others believe that under the constraints of the exchange rate and air defense rotation, it is difficult for OMO/MLF to cut interest rates, and the funding rate is expected to fluctuate around the policy rate. Monetary policy is expected to remain stable, and in the second half of this week, 7 days will begin to cross the month, beware of capital fluctuations.
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