On Dec. 15, the People’s Bank of China (PBOC) announced that it would carry out 950 billion yuan of medium-term Lending Facility (MLF) operations (including the renewal of two MLF maturities on Dec. 7 and 16) and 10 billion yuan of reverse repurchase (REPo) operations to maintain reasonable liquidity in the banking system. Public data showed that the release of a record single-day volume.
Source: Central Bank website
It was also the fifth consecutive month that the People’s Bank of China exceeded the quota for MLF since August. The term of this operation is 1 year, and the winning interest rate is 2.95%, and the reverse repurchase term is 7 days, and the winning interest rate is 2.2%.
It is reported that on the 6th and 16th of this month, there will be 300 billion YUAN of MATURITY of MLF, and a total of 600 billion yuan of maturity this month. This MLF operation will realize the continuation of the excess of maturity.
Tao Jin, deputy director of the Center for Macroeconomic Research at the Suning Financial Research Institute, said that in the expectation of a gradual slowdown in the pace of credit expansion, the central bank is paying more attention to maintaining reasonable liquidity sufficiency in the near future. More than 300 billion yuan of open-market operations were due on December 16, so more MLF was put in than was due in the middle of the month.
“Last week, the yield of inter-bank certificates of deposit in the secondary market dropped significantly, and the overall capital level was loose. Combined with year-end factors, the central bank achieved a net release.” Zhang Wei, principal researcher of Kunlun Health Asset Management, said there was a need for monetary policy to “wire in advance”, given the potential impact of deleveraging and credit defaults next year on liquidity in the banking system.
In recent months, MLF continued to oversupply and put medium – and long-term funds into the market to ease the bank’s debt end cost. From the perspective of Shibor (Shanghai Interbank Offered Rate), the medium – and long-term funds rate has been continuously declining since this month, and the 1-year Shibor went down from 3.27% at the beginning of the month to 3.23%. Short – end funds rates have edged up recently as the tax season nears.
Interest rate changes in MLF have also traditionally been regarded as a barometer of the quoted loan market rate (LPR). From May to November this year, LPR one-year and five-year varieties remained at 3.85% and 4.65%, respectively, marking a “stationary period” for seven consecutive months. Will LPR offer be adjusted in the last month of this year? The industry said that the high probability will maintain the former value.
Tabulation: China’s Wealth
Tao jin pointed out that this year’s LPR reduction space has been very small, is expected to remain in December LPR high probability will remain unchanged.
Zhang wei said this month LPR bid change is not likely. Before, many institutions in the market worried about “tight credit”, but this worry was unnecessary for two reasons. First, in the process of soe reform, we should not only break the rigid payment, but also keep an eye out for the liquidity problem in the commercial banking system. Second, next year’s economic growth before and after the year-on-year difference may be relatively large, there is the need to relax moderately in the second half of the year.
Wen Bin, chief researcher of Minsheng Bank, also pointed out that, on the whole, the central bank’s monetary policy gradually returns to the normal state. While maintaining reasonable and abundant liquidity to promote economic recovery, it avoids the “flood flooding” driving up asset prices, indicating that LPR will remain unchanged with a high probability.