[ Abstract ] The positive side of the RRR cut is also to confirm the fine-tuning of the monetary policy orientation, from the previous neutral neutral to the neutral or even the neutral loose.
Capital fabric "rainy weather"
The real advantage of the RRR cut was that the money market was “cold rightâ€. In recent days, the market funds have been relatively tight, and it has been rare since the beginning of the year. Analysts pointed out that the short-term capital tension is due to the tax period disturbance. After the tax period expires this month, the implementation of the RRR cut is just around the corner, and the capital fabrics are “rainy and sunnyâ€; this year’s liquidity is expected to be better than last year’s total and structural level, but this The second RRR cut is not purely “discharged†and should not be too high for monetary easing.
The peak of the April tax period ended the previous period of continued easing of funds, but the level of tension in the money market last week was still unexpected.
Since the beginning of last week, the demand for funds in the market has increased significantly, but the short-term funds that were previously abundant have suddenly “broken outâ€, resulting in a rapid reversal of the market oversupply. The institutional positions are difficult to level, tensions are spreading, and short-term money market interest rates are rising. Many market participants said that the funds were extremely tight, and the fund-based sentiment index compiled by some institutions reached a new high.
April is the big month of taxation. Last week was the peak period of tax payment, and the funding was tighter than expected. Due to the Ching Ming holiday, the tax payment period for each tax category was extended to 18 days this month. From the past, the peak of the tax period was around the 18th. Therefore, last week was the period of maximum tax disturbance. Market participants estimate that the amount of tax withdrawals in the middle of this month may reach the trillion level, which may not be underestimated.
The net liquidity of the central bank in the previous period also had a certain cumulative effect. Last week, the central bank issued a net investment of 470 billion yuan through reverse repurchase operations. The scale was not small, but it has been net liquidity for four consecutive weeks, with a cumulative net withdrawal of 570 billion yuan. The continuous net withdrawal of the central bank has a cumulative effect, which magnifies the disturbance caused by the large amount of tax paid into the warehouse.
The reason why market participants feel that the funds are extremely tight in recent days may also be related to the fact that the previous funds have been loose. In the first half of this month, the market funds were still relatively loose, and some money market interest rate indicators once fell to a nearly one-year low. For the sudden sharp tightening of funds last week, some market participants were not prepared enough.
It is worth noting that the funding is tight as the central bank announced the RRR cut. On the evening of April 17, the central bank announced that it would reduce the percentage of financial institutions by 1 percentage point in order to replace the medium-term loan facilities. The RRR cut was a strong signal of the total amount of relaxation policy, but a few days after the announcement of the RRR cut, the market funds were very tight and did not completely subside until the beginning of this week. On the 23rd, the exchange repurchase rate overnight exceeded 10%.
The reason behind this may be that the tax period disturbance has not been completely eliminated, and the central bank has reduced the open market operation before the implementation of the RRR cut. Since the 20th, the central bank has stopped the net market release.
However, the implementation of the RRR cut this week is imminent, and the fiscal expenditure at the end of the month is extremely strong, and the capital fabrics will be “rainy and sunnyâ€.
The central bank said that this time it is a partial reduction of "partial financial institutions" to "replace medium-term lending facilities", but the actual coverage is large, and the RRR is not small. At the same time, it replaces the MLF with a relatively high interest rate of about 900 billion yuan. It will also release 400 billion yuan of incremental liquidity.
In fact, even if most or even all of the RRR cuts may be temporarily frozen due to the replacement of MLF and possible central market open market hedging operations, it does not change the central bank’s previous replacement of banks with long-term, extremely low-cost funds. The nature of short-term, higher-cost funds borrowed. The positive side of the RRR cut is also to confirm the fine-tuning of the monetary policy orientation, from the previous neutral neutral to the neutral or even the neutral loose.
In short, in terms of market capital, this RRR cut constitutes a substantial positive and will have a positive impact on the future liquidity situation. At the same time, at the end of the month, fiscal expenditure will increase, supply liquidity, and the impact of fiscal revenue and expenditure on liquidity will also change positively. Therefore, this week's liquidity easing is a high probability event.
Further, the fine-tuning of monetary policy orientation has been confirmed. The space for continuing to replace MLF through RRR reduction still exists. The injection of long-term and low-cost liquidity will reduce the capital cost from the source, improve the inherent stability of liquidity, and cooperate with the central bank. The operation of the peak-filling valley is expected to have better liquidity at the aggregate and structural levels this year than last year. The interest rate center of the money market will decline and the volatility of the money market will decline.
However, the overall tone of monetary policy does not change to a stable neutral. In order to avoid the resurgence of internal leverage in the financial system, and to control external pressures, the funds will not be excessively loose. The recent tightness of funds, although it will not last too long, has just poured cold water on the overly optimistic market sentiment.
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