After restarting the reverse repo transaction on the previous day, on the 17th, the central bank released a counter-repurchase operation in full volume, and the hedging of the reverse repurchase and MLF due to maturity, the signal of maintaining a stable liquidity in the money market. Market participants said that the central bank's open market operations have exceeded expectations in the near future. If this trend continues, the market capital fabrics will remain stable this week. The main focus of the month is on the possible disruption to liquidity in the next week's tax period.
Central bank reverse repurchase
On the 17th, the central bank launched a reverse repurchase operation of RMB 190 billion, including a seven-day period of 100 billion yuan and a 14-day period of 90 billion yuan. The amount of funds was increased by 170 billion yuan from the previous day. On the same day, 60 billion yuan of reverse repurchase expired, and another 128 billion yuan of MLF expired. From the full-caliber calculation, the central bank still achieved a net investment of 2 billion yuan, the second time since October through the open market operation (OMO) A net liquidity is placed.
The first OMO net launch this month was on October 13. On the same day, the central bank suspended the reverse repurchase transaction, but launched a 298 billion yuan one-year MLF operation, one-time completion of the rolling operation of the full-month MLF (439.5 billion yuan), and provided a certain amount of incremental liquidity. On the same day, there were 20 billion yuan reverse repurchase and 84 billion yuan MLF expired, so the central bank realized a net investment of 394 billion yuan.
Traders said that the liquidity of the money market last week was tight, especially after the central bank over-renewed MLF, the short-term liquidity returned to a more abundant level, and the representative 7-day repo rate of the interbank market once hit 3 Month new low. Considering that only RMB 170 billion reverse repurchase expires this week, and the 355.5 billion MLF that has expired has been renewed in advance, it is expected that the central bank will partially hedge the amount of maturity, but from the past two days of operation. In the case of the situation, the central bank’s funding has exceeded expectations.
The trader believes that the recent central bank's open market launch is slightly more than expected, indicating a clear attitude to maintain liquidity.
Supply and demand pressure or a slight increase
As the central bank reversed the repurchase of sufficient amount of hedging dues, on the 17th, the overall market capital remained stable and loose, and the short-term money market interest rates rose and fell. Traders said that the market funds were generally loose yesterday, and the funds were adequately supplied overnight. There were more points in the end, but the demand was concentrated in 7 days to 21 days.
On the 17th in the interbank market, deposit-type institutional bond pledged repo rate fluctuations were limited, overnight repo rate rose 3BP to 2.59%, representative 7-day repo rate fell more than 1BP to 2.87%, 21 days across the month The repo rate fell 3BP to 4.16%.
On the 17th, the exchange market repo rate oscillated lower throughout the day, indicating that the financing pressure of non-bank institutions continued to ease. By the close of the day, the Shanghai Stock Exchange closed at 72.65% and 3.315% overnight, down 31.5BP and 38BP respectively.
Market participants pointed out that this week's liquidity disturbance factor mainly lies in MLF expiration and government bond issuance. According to the current central bank's reverse repurchase operation, the funds are basically innocent, but the impact of quarterly tax payment by enterprises next week is still worthy of attention.
According to the notice of the State Administration of Taxation, in October, the tax and fee categories such as value-added tax, consumption tax, and corporate income tax were declared and paid, and the deadline for filing tax returns was extended from October 23 to October 25. Since October is the first month of the quarter, companies are required to declare and pay taxes such as the previous quarter's income tax. The amount of tax paid is usually large, which may cause some disturbance to the liquidity. Because this month's tax period is later, the effect of the merger and the end of the month will have an overlapping effect, which will undoubtedly increase the risk of liquidity fluctuations in the latter part of this month.
Market participants expect that the funds will remain stable this week, and the supply and demand pressure will increase slightly next week, but the actual performance of the funds will still depend on the liquidity of the central bank.
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