On the 12th, the central bank’s open market operations continued to be suspended, as no reversal repurchase expired, and neither net delivery nor net liquidity was returned on the same day. The market funds are less lenient than the beginning of the month, but the overall situation is still stable. Market participants pointed out that the central bank continued to “cut off”, indicating that the current liquidity is still acceptable. It is expected that in the latter half of the week, as the impact of tax payment appears, the funds will tend to tighten, but when necessary, the central bank will initiate liquidity. At present, the balance of reverse repurchase has been greatly reduced, which makes the space for launching large, and the problem of stable and cross-season funds is not big.

Loose before

On the 12th, the central bank’s open market operations continued to be suspended. The central bank announced that the current liquidity of the banking system is at a relatively high level and that no open market operations will be carried out on September 12. According to public data, the 12-day non-reverse repo expired, so the central bank’s move was neither a net return nor a net liquidity.

Although the central bank continued to “cut off”, the market funds were less lenient than last week, but overall it still showed a smooth and slightly looser feature. On the 12th, the inter-bank market repo rate did not fluctuate, the short-term was stable, and the mid-long end was mixed. The overnight repo rate (DR001) was steady at 2.62%, and the representative 7-day repo rate was stable. At 2.87%, the 14-day repo rate for a slightly longer period rose slightly by 5BP, while the 21-day variety for the inter-season fell by 7BP.

Traders said that the central bank continued to “cut off”, but the liquidity was generally innocent. Although the supply of funds was not sufficient at the beginning of the month, it was not difficult for the institutions to close their positions; as the 15th approached, some institutions began to pay taxes. In preparation, the demand for funds increased in 7 days and 14 days.

Short-term or tight balance

Since late August, the central bank’s open market operations have once again turned to net return liquidity. According to statistics, from August 21 to September 12, only two trading days have achieved net delivery, including the net release of the central bank's continued MLF expiration on September 7, and the remaining 13 trading days. All of them achieved a net return. During this period, the central bank accumulated a total of 851.5 billion yuan of funds, and the amount of funds returned was not small.

Even though the fiscal expenditure in August may have formed a certain amount of liquidity supply, the central bank has continued to carry out a net return, which is conceivable for the impact of the historically low over-storage rate. However, in the recent period, the market funds The performance is still acceptable, and the central bank’s announcement has repeatedly mentioned that liquidity is at a relatively high level. In this regard, market participants speculate that this may indicate that there are other liquidity supplies since August, most likely foreign exchange.

In August, the balance of foreign exchange reserves continued to increase by US$10.8 billion. Considering the exchange rate conversion factors and the profit and loss of foreign exchange investment, many market participants speculated that the foreign exchange account may have turned positive in August, and then consider that the RMB continues to appreciate rapidly since September. The phenomenon is obvious, and foreign exchange reserves may have further growth.

Of course, in the case of the central bank's apparent market intervention, the increase in foreign exchange holdings may be limited. Market participants pointed out that whether the funds can survive the season, mainly depends on the operation of the central bank. With the impact of tax payment in the second half of this week, the possibility of a tight balance of funds will be more likely. It will increase, but it is expected that the central bank will provide necessary liquidity support, and the current reverse repurchase balance will be reduced to a low level. This will also make the central bank's short-term liquidity fluctuations through reverse repurchase operations become more convenient, and there will be fiscal release near the end of the month. Support, comprehensive consideration, the probability of a smooth “customs clearance” in September is still relatively large.