Financial data for April was released on Saturday, and the data collapsed across the board.
The growth rate of M1 has entered the negative range, which only happened once during the epidemic.
So I saw that a lot of self-media were shouting: deflation is coming, and A-shares are going to plummet.
After the data was released, my friends in the community were also frightened and quickly asked what was going on.
My answer is:
Then in the community, I wrote a post to explain this data to my friends. The original text is as follows:
The financial data for April is out.
Judging from the surface figures, it was a collapse on the entire line, and it collapsed completely. It scared a lot of people's faces green.
1.M1 -1.4% year-on-year;
2.M2 7.2% year-on-year;
3. The stock of social finance increased by 8.3% year-on-year.
However, the social finance data is in conflict with the interest rate data that we usually track.
According to the guidance given by the interest rate, it should not be bad, but it should be better.
The cause of the problem lies in the word "game".
The three parties to the game are: the central mother, the treasury and the bond market traders.
But behind the game lies the tailwinds of a rebound in risk appetite.
Next, I'll help you peel back the cocoon.
First, the position of Yang Ma
On the one hand, it has exceeded the expected RRR cut and released sufficient base currency.
On the other hand, the LPR interest rate has been significantly reduced, and the interest rate has been lowered through various other tools, such as the refinancing rate for the technology industry is only 1.75%, and borrowing money is like not having money.
Not only that, but in April, the funding rate was also at a low level, indicating that there is no shortage of money.
Although the central mother has prepared the money, she is waiting for the financial debt to be withdrawn.
However, the issuance of bonds from January to April this year was obviously slow, mainly by local governments.
The central government hopes that the financial authorities can issue bonds as soon as possible to maintain the balance of bond issuance, but do not wait for a certain time to concentrate on action, which will easily lead to flooding.
In other words, Yang Ma doesn't want to tear each other down because of inadequate internal coordination, and finally fall into a flood charge by herself.
Second, the financial position
From a fiscal point of view, it would certainly like to see a lower interest rate on bonds.
However, the 10-year Treasury rate has been falling so far this year, reaching its lowest point on April 23.
In the case of declining interest rates on treasury bonds, local finances have a strong wait-and-see mood.
He hopes that interest rates will fall a little more before issuing bonds.
But if she always waits and sees like this, Yang Ma is anxious.
So you have to take measures to take the initiative.
A better way is to raise the interest rate on government bonds.
When local finances see that interest rates are about to rebound, they will rush to issue bonds.
Therefore, Yang Ma took action at the beginning of the month.
First of all, there are all kinds of shouts to pay attention to the risk of long-term debt!!
3. The position of bond market traders
The trader earns the spread.
After they buy bonds, they hope that interest rates will continue to fall.
The more people who buy, the faster it falls.
Because they are sure that the central government will ease money, they are unscrupulously long treasury bonds.
As a result, the rate of interest on government bonds has fallen very quickly, which is seriously detached from economic fundamentals.
Once out of trend, the fiscal side will wait and see.
In order to break the wait-and-see mood, Yang Ma is going to do something to bond traders.
As a result, the monetary policy was tightened, allowing the interest rate on Treasury bonds to rebound sharply on April 23.
Many traders were played to death, and they were also scared out of a cold sweat.
Then it converges on the behavior of going long.
Since the beginning of May, the pace of fiscal bond issuance has accelerated markedly.
Yang Ma finally breathed a sigh of relief that his goal had been achieved.
Fourth, knock on the trader's tools
After reading the positions and games of the three, we need to know what tools the central mother used to shrink the currency this time.
This time, the tool is called: "Manual Supplementation" is prohibited.
On April 8, 2024, the self-discipline mechanism for market interest rate pricing issued the "Initiative on Prohibiting the Cultivation of Deposit Market Competition Order through Manual Interest Replenishment and High Interest Solicitation".
What is manual interest supplementation?
When the economy is bad, it is difficult for banks to complete their lending tasks.
In order to cope with the assessment, they will play all kinds of tricks.
For example, find a high-quality enterprise A, let them pity themselves, and cooperate with them to lend.
A had a good relationship with the bank, so he agreed.
So A borrowed a loan of 100 million from the bank.
But borrowing money has to pay interest, and A can't be stupid enough to help the bank with money.
The bank said: It's okay, you ask me to borrow 100 million, the interest rate is 1.75%, and then save the money back, I will give you a deposit interest rate of 1.8%.
It stands to reason that banks can't discount money to pull loans.
But in order to cope with the assessment, there is no way.
This method of operation is called manual refill.
With this operation, the bank made the M2.
If the money saved back by the business is a demand deposit, it also creates M1 at the same time.
But everyone knows at a glance that this kind of M1 and M2 has no substantive meaning and belongs to the idling of funds.
In April, the central mother banned this, so the bond interest rate was suddenly jerked.
In the same way, everyone understands that after squeezing out this part of the water, the real M1 and M2 are restored.
The previous M1 and M2 were inflated.
As a result, April's financial data collapsed surprisingly violently.
But there are other reasons why Yang Ma chose to use this method at this time.
Fifth, the velocity of money is really picking up
When the economy is really bad, Yang Ma turns a blind eye to manual interest compensation.
After all, Yang Ma doesn't want the real data to scare everyone.
But if the economy starts to improve, Yang Ma wants to see more real data.
So you have to squeeze the water.
In fact, this is the same purpose as beating bond market traders.
Bond market traders are desperately long bonds, which distorts the significance of long-term bonds to the economy.
By pressing bond market traders to death, long-term bond interest rates can truly reflect the current state of the economy.
Yang Ma can adjust the rhythm according to the data.
Then you should be able to think of it now.
Now that the central mother is squeezing the water, then the velocity of currency circulation is really picking up!
MV=PQ
From the April price data, we can see that P (prices) are picking up.
Then the MV on the left should also be increased.
In April, when M decreased, V inevitably increased. (Meaning risk appetite has picked up)
To sum up, it is not how bad the data was in April this year, but the inflated data in the past
And the reason why Yang Ma wants to squeeze water now is because some things are getting better.
Otherwise, you will not be able to see the CPI rebound, the 10-year treasury bond interest rate will rise, the 1-year certificate of deposit interest rate will fall, the CSI 300 will rise, the funding rate will fall, the PMI will be in the expansion zone, and the exchange rate will stabilize......
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