Core Tip: On the 18th, the main repo rate in the interbank market continued to decline slightly, and the funds were further improved. Banking institutions are more likely to flatten their positions, but non-bank institutions that pledge credit bonds are still at a higher lending price. Due to the gradual end of the monthly tax payment, the central bank’s open market reverse repurchase continued to increase its net investment. Therefore, the bank has more abundant funds and liquidity has gradually improved.

BEIJING (CNFIN.COM/XINHUA08.COM) - On November 18, the main repo rate in the interbank market continued to decline slightly, and the funding was further improved. Banking institutions are more likely to flatten their positions, but non-bank institutions that pledge credit bonds are still at a higher lending price. Due to the gradual end of the monthly tax payment, the central bank’s open market reverse repurchase continued to increase its net investment. Therefore, the bank has more abundant funds and liquidity has gradually improved.

The bank's overnight pledge repo weighted average interest rate fell by 3.45 basis points to 2.2574% in the afternoon; the 7-day interest rate fell 8.63 basis points to 2.4768%; the 14-day interest rate fell by 0.90 basis points to 2.8985%. The 1-year loan base rate (LPR) is maintained at 4.30%.

Shanghai Interbank Offered Rate SHIBOR showed that Shibor reported 2.2650% overnight, up 0.60 basis points; 7 days Shibor reported 2.4440%, up 0.80 basis points; 3 months Shibor reported 2.9505%, up 1.80 basis points.

Traders said that although the central bank has increased its efforts in both MLF operations and the open market this week, as the pressure on the depreciation of the RMB exchange rate has increased, it is still necessary to pay close attention to whether it will bring about a change in foreign exchange holdings and other factors that disrupt the flow of funds. Therefore, the market is still expected to be cautious, and short-term capital fabrics are difficult to loose.

This morning, the central bank launched a 270 billion yuan reverse repurchase operation in the open market, including 145 billion yuan for 7 days, 120 billion yuan for 14 days and 25 billion yuan for 28 days reverse repurchase operation. The winning bid rate was flat at 2.25%. , 2.4% and 2.55%. On the same day, there was a reverse repurchase of RMB 190 billion, and a net investment of RMB 80 billion was realized on a single day, which was the sixth consecutive day of net investment. This week, the cumulative net investment was 425 billion yuan, and the net return last week was 300 billion yuan.

The analysis pointed out that after the second large-scale MLF operation in the month, the central bank did not reduce the open market operations and continuously implemented net liquidity. Obviously, the central bank hopes to quell short-term currency market volatility as soon as possible and ease the market's growing cautious attitude toward monetary policy and liquidity.

At present, the continued tension of funds has eased, but in the absence of changes in the central bank's monetary policy, the central bank's hedging operations can only ensure that the funds are not excessively tight. Once the funds have eased, the central bank is in the open market. The delivery will also be reduced.

Considering that the central bank's continued snowball-style reverse repurchase will inevitably lead to increased pressure on future capital maturity, the future volatility of funds is still difficult to avoid.

Today, the central parity of the RMB against the US dollar fell by 104 basis points, fell below the 6.87 mark to 6.8796, and fell for the eleventh consecutive trading day, setting a near-eight-and-a-half-year low since June 20, 2008. The longest losing streak since the month.

Federal Reserve Chairman Yellen said on November 17 that the US economic data is improving in the expected direction, and the Fed is soon approaching the appropriate rate hike. Yellen also warned of the risk of raising interest rates late. Yellen’s statement reinforces the market’s expectation that the Fed will raise interest rates for the first time this year at the policy meeting from December 13th to 14th. The dollar has therefore been boosted.

Huang Xiaolong, deputy director of the Financial Stability Bureau of the Central Bank, said that the central bank has made a lot of preparations for the exchange rate policy. These policy reserves will make China a relatively active position in the future adjustment.

Looking forward to the market outlook, the analysis believes that the return of monetary policy is more stable and clearer. The pressure for “liquidity” in the future is hard to decrease, and the uncertainty of “release” is rising. Considering the already low bank reserve ratio, the current weak balance between supply and demand, which is supported by the central bank's “short money” and “expensive money”, is vulnerable to shocks, cross-border capital flows, seasonal factors and expected changes in monetary policy. And so on, it may become the fuse for the future tightening of liquidity.