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August 2, 2018

Experts: in June the central bank to raise interest rates is a rate things were expected to remain there about RRR operations during the year

In June the central bank will continue to follow a high probability the Federal Reserve to raise interest rates, but the impact on the market or limited, need to focus on impact of financial market volatility may have on specific policies landing point in time。During the year there will still be expected to drop registration operation, the operation will continue while the MLF。  Recent policy intensive guidance to improve and increase the efficiency of the transmission mechanism of liquidity, liquidity delamination problem is more structural performance under the central bank "stress tests"。  With the new information management regulations, regulatory policies have been all kinds of floor for money market investment vehicles will have a structural impact。For interbank deposits, the term structure of expected future releases tilted to the accounting for three months or more, or take the period of interest rate spread; and bill business, the bill is not necessarily a "qualified high-quality liquid assets", but there is still room bill repo market。May 2018 maintained a reasonably stable liquidity, current market expectations for future monetary policy relatively optimistic。  Interest rates and RRR are available in June the central bank may still raise interest rates to follow。June 14 is about to announce the latest resolutions of the Federal Reserve meeting on interest rates, from the current market expectations the Federal Reserve and the CME observed, the Fed rate hike almost a foregone conclusion。I believe that China's central bank will still be a slight increase following the reverse repo rate, because the central bank has been explicitly mentioned in the May 11 release of "2018 first quarter monetary policy report" in the "since 2017, money market interest rates continued the interest rate is higher than the open market operations since 2018, despite the narrowing of spreads, but still not a small, open market operations and the interest rates can be further narrowed slightly upward both spreads and boosting interest rates on money market operations open conduction of market interest rates, but also conducive to the formation of market players expected a reasonable interest rate, financing constraints irrational behavior, the stability of the macro-leverage may play a role. "。While the medium and long term, structural policy shift to deleveraging, continued to tighten policy period has ended, liquidity is expected to generally stable; although the economy and corporate earnings may decline slightly, but will continue to optimize the economic structure, the risk will be stable release。Therefore, large changes in the external environment for China's capital market will not happen, basically have to continue stable operation of the power basis of structural deleveraging and development of direct financing。However, financial market volatility may affect the implementation of specific policies point in time。  During the year there will RRR operation。April 17, the central bank unexpectedly announced directional pay standards, and formally implemented in April 25。At the same time according to data released by the central bank official, since April 25, reducing the amount of funds directed at prospective release of 1.About 3 trillion yuan, of which 900 billion yuan for the replacement of MLF, 4000 Yiyuan release most of the remaining firms to the city and county non-agricultural firms, mainly used to serve small and micro business loans。Directional drop quasi similar operation will continue during the year。Reduce the cost of financing small and micro enterprises have been given specific timetable, to a certain extent with the need to drop the quasi-directional operation。Since late April, the frequent incidents of credit default market panic increased, the central bank has passed the daily operations to create a stable market liquidity conditions on the open market operations。On the one hand, a net funds rate coordination between the central and the month monthly credit debt financing: When credit debt financing more difficult, due to lower funds rate to create a favorable environment for the mobility issue credit debt。On the other hand, the central bank mainly through the daily open market operations to ensure reasonable and stable liquidity: When the funds rate up significantly, reverse repo net amount invested will enlarge; on the contrary, part of the funds from the market return。But at the necessary time, if the "wave of defaults" is expected to bring over systemic risk, the central bank may also help lower quasi stronger policy tools to ensure the stability of the market。Moreover, from the point of view MLF replacement, according to the information the central bank's official website announced June 1, even considering 900 billion yuan MLF has completed the replacement of the remaining stock of MLF still have 4.017 trillion yuan。In the process of transformation of the way the central bank base money, it may also be partially replaced by MLF quasi-way directional drop, thereby reducing dependence on financial institutions for the financing of wholesale。MLF will continue to operate, but does not affect the operation of RRR。But concern is that the need for both the amount of (interim funding gap supplement), or in terms of price (mid-term policy rates) point of view, MLF has its existence, the future will continue operating MLF。  Smooth flow stratification leading questions marginal improvement in liquidity transmission mechanism, under the stress test will show。Since 2018, not including the April-than-expected tense period of time, in fact hierarchical mobility problems compared to 2017, there have been marginal improvement。The rapid surge in April spreads are actually layered structural funds rate seen in the central bank "stress tests": appears to have had no prominent stratification liquidity problems at the time of tightening the money again exposure to non-default silver as the main institutions。When the interest rate market funds tight, the vulnerability of highly leveraged institutions are also the strongest, natural easily lead to huge differences in the cost of capital。  Policy guidance liquidity smoother transmission mechanism。This year to ease the liquidity problems of layered what is temporary, or policy level guidance trend?I believe that the greater probability of the latter。First, according to the central bank's official website news, in March 2018, the central bank introduced a new dealer Evaluation Index System open market operations primary, in which respect for the investigation, "the transmission of monetary policy" including the "Liquidity stratification conduction situation." the evaluation indicators, designed to ensure greater inter-agency mobility conduction efficiency。Secondly, May 26, silver China Insurance Regulatory Commission officially issued "commercial bank liquidity risk management approach" (hereinafter referred to as "new liquidity rules")。Among them, the liquidity matching ratio (LMR) of the "weighted funds" item (denominator) in comparison to the draft released in December last year, will be less than seven days out of short-term interbank financing (including deposit within 7 days industry, placements with banks and reverse repurchase agreements of) the discount rate to 0%, update the content can help organizations liquidity matching rate of compliance。More importantly, such a provision will help ease liquidity problems among financial institutions stratification, and thus play a role in stabilizing markets, to ensure the smooth conduct of inter-agency mobility。  Differentiation between market investment vehicles and related business money April 27, "information management new rules" after landing, related regulatory policies and rules have been put forward for the future of this money market investment vehicles and related business will generate structural influences。Specifically: first, NCD issued for a period preferences or lengthen the term spreads are expected to widen。Has been six months and three months period NCD maintained at a relatively low interest rate, cross-quarter point in time there will be significant upside down。But with the formal implementation of the new liquidity rules, although a limited impact in the short term, but long-term issue such a structure may change。This means that if the need to improve the liquidity index matching rate, it must be issued at least three months varieties。After the pre-draft introduced, the market view that liquidity matching rate is one of the larger standard indicators difficulty, because of this, this transition period will LMR formal draft of the new regulations liquidity extended to January 1, 2020 day, before being used as monitoring indicators。Therefore, the margin point of view, in order to standards, the term structure of future NCD issue will gradually increase the proportion of six months, corresponding to the issue of interest rates or the term spreads widened NCD。  Second, the bill is not necessarily a "qualified high-quality liquid assets", but there is still room bill repo market。  Bills not necessarily be "qualified high-quality liquid assets"。The adequacy assessment for the liquidity coverage ratio 200 billion yuan more than the size of the bank, as well as high-quality liquid assets 200 billion yuan or less the size of the bank's assessment, the first step are qualified high-quality liquid assets identified。Under supervision of qualified high-quality liquid assets and assets of an asset two configuration, wherein two of the assets and the assets 2A and 2B constituting assets。A principal assets include cash, central bank reserves and other sovereign debt and central bank bonds, notes do not belong to the category。2A, at stated the assets, the explicit reference to "final repayment obligations not borne by the financial institution or its affiliates."。In the paper market structure of China among the major bank commercial paper acceptances based, which means hidden behind a bank credit, it can not be incorporated into the corresponding assets 2A。But some commercial paper, can refer to requirements "corporate bonds and covered bonds", and was included in 2A or 2B qualified high-quality liquid assets。Figure 2A to assets, for example, commercial paper to meet the following conditions or can be incorporated 2A assets: first, not issued by a financial institution or its subsidiary bodies corporate bonds; second, not issued by the Bank or its affiliates guarantee bonds; third, long-term credit rating given by qualified external credit rating agency recognized by the banking regulatory agency at least AA-; or if the lack of long-term credit ratings, have the same short-term credit rating; or lack of external credit ratings when, according to the same probability of default and the external credit rating of AA- more than the corresponding probability of default derived from the bank's internal credit rating and; fourth, in large scale, with market depth, trading activity and low concentration of market trading; fifth, history records show that in a market stress scenario is still a reliable source of liquidity, in severe liquidity pressure period, the bonds within 30 days prices fell more than 10% increase in the discount rate or repo no more than 10 percentage points。  Thus, the conditions are relatively stringent, requiring strong liquidity, not all could be included in commercial paper 2A qualified high-quality liquid assets。Overall, not all bills can be included in a qualified high-quality liquid assets category。  Notes repurchase is still room。In the calculation of the liquidity coverage ratio illustrates part of the transaction, in particular the emphasis on "qualified high-quality liquid assets arrived (pledged) financing transactions (such as repurchase) provided to the counterparty should be deducted from the molecular portion" of a portion of the bill can not be included in a qualified high-quality liquid assets does not mean that entirely a bad thing, but will help to improve the bill repo market activity, pledged bills can not be deducted from a molecule, it helps to improve indicators。  (Ho Jin-Jin Department of Industrial Research Fellow, Department of Industrial Bank Lu political commissar, Huafu Securities chief economist) Related reports