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Tencent News "First Line"

Author: Zhu Yuting Editor: Liu Peng

On July 22, the central bank issued an open market business announcement, announcing that the 7-day open marketReverse repoThe operation adopts a fixed interest rate and quantity bidding, and the operating interest rate is adjusted from 1.8% to 1.7%.

The one-year and five-year LPRs reported on the same day both fell by 10 basis points to 3.35% and 3.85% respectively.

On the same day, the central bank’s official website issued an announcement announcing the sale of medium- and long-termBondsFor MLF participating institutions, MLF collateral will be reduced or exempted in stages.

Industry authorities provide in-depth interpretation of this series of adjustments.The decline in LPR indicates that the quality of quotations is constantly improving and is in line with the needs of the current economic and financial situation, which is conducive to supporting the continued recovery of the economy.

LPR is the main reference benchmark for loan interest rate pricing. The decline in LPR sends a policy signal of stabilizing growth and promoting development, which is conducive to stabilizing market expectations, and will drive the financing costs of the real economy to further decline steadily, stimulate credit demand, and promote corporate investment.

The reduction in LPR interest rates for terms of more than five years will help reduce the interest burden of mortgage borrowers and promote consumption.

On May 17, the People's Bank of China abolished the national mortgage interest rate policy floor, and the interest rates on newly issued mortgages declined significantly.

In June, the national average interest rate for newly issued housing loans was 3.45%, down 66 basis points year-on-year and 17 basis points month-on-month, reaching the lowest level in history.

Since the beginning of this year, the LPR for terms of more than five years has fallen by 35 basis points in total. Existing mortgage borrowers will also enjoy the benefits of the LPR decline after the next repricing date, reducing their interest burden and enhancing their consumption capacity.

Based on an estimated mortgage principal of 1 million yuan, a term of 30 years, and equal principal and interest payments, the monthly interest expense can be saved by about 200 yuan, and the total interest savings can exceed 70,000 yuan.

In recent years, financial support for the real economy has been continuously strengthened, and the decline in loan interest rates has been greater than the decline in LPR, especially the loan interest rates for the best customers have fallen more, resulting in a certain deviation between the LPR quotation and the loan interest rates for the best customers.

Pan Gongsheng, governor of the People's Bank of China, proposed at the Lujiazui Forum that "in response to the problem that some quoted interest rates deviate significantly from the actual interest rates for the best customers, we should focus on improving the quality of LPR quotations to more truly reflect the level of loan market interest rates." The decline in LPR this time also reflects that some quoting banks have corrected the deviation between their quotations and the loan interest rates for the best customers by lowering their quotations, and the quality of LPR quotations has continued to improve.

"After the rectification of illegal manual interest payments, banks' funding costs have steadily decreased, and the impact of the LPR decline on banks' net interest margins is controllable." Industry insiders further analyzed.

The decline in LPR this month is partly attributed to the effect of the previous regulatory authorities' rectification of illegal manual interest payments, which led to the early reduction of banks' funding costs.

It is understood that after rectifying the illegal manual interest payment, the interest expenses saved by the bank in the short term are close to the effect of reducing the deposit interest rate once. After the deposit interest rate is reduced, the existing deposits will be gradually repriced when they mature, and the effect will be gradually manifested, while the reduction in interest expenses brought about by rectifying the illegal manual interest payment is immediate.

Many national banks reported that after rectifying the illegal manual interest payments, their deposit interest rates in June, especially those on corporate deposits, have dropped significantly compared with April, and their net interest margin has rebounded.

Therefore, it is expected that the impact of this LPR decline on bank net interest margin and bank profits will be controllable, and the impact on shareholders' equity of listed banks will also be relatively small.

Industry insiders also mentioned that the effectiveness of the deposit interest rate market-based adjustment mechanism is still being released.It is expected that banks will reasonably adjust deposit interest rates based on changes in market interest rates, which will also be conducive to the stability of net interest margins.

On the same day, the central bank also issued an announcement to adjust the release time of the LPR interest rate from 9:15 on the 20th of each month to 9:00. Industry insiders believe that thisIt can better connect with the operating hours of the financial market.

The opening hours of various financial markets vary. For example, the money market, bond market and interest rate swap market start trading at 9:00, while the stock market and government bond market start trading at 9:00.futuresThe market will start trading at 9:30.

Before the market opens, various financial market participants often formulate trading strategies and plans based on the latest economic and financial data of the day.

LPR, as an important reference for loan interest rate pricing, is released in advance at 9 a.m., which can better connect with the operating hours of various financial markets, and is conducive to equal access to information and fair transactions among different financial market participants.

Industry insiders also pointed out that the 7-day reverse repurchase operation rate is clearly the central bank's main policy rate, the policy color of the medium-term lending facility (MLF) rate has been weakened, and the interest rate transmission relationship from short-term to long-term has been gradually straightened out.

The previous temporary repurchase and reverse repurchase rates were determined by adding or subtracting points on the basis of the 7-day reverse repurchase operation rate. In addition, the optimization of the open market operation bidding method today has shown that the central bank has clearly defined the 7-day reverse repurchase operation rate as the main policy rate.

The LPR reported on the same day responded quickly and adjusted by the same amount as the 7-day reverse repurchase operation rate. This also indicated that the LPR quotation shifted to refer more to the central bank's short-term policy interest rate, and the interest rate transmission relationship from short to long term was gradually straightened out.

The MLF interest rate on July 15 was not adjusted, but the LPR reported on July 22 declined, indicating that the reference role of the MLF interest rate to the LPR is gradually weakening and the policy color of the MLF interest rate has faded.

Regarding the phased reduction of MLF collateral, industry authorities believe that this will help balance the supply and demand in the bond market.

This year,Long-term bondsAffected by factors such as slow supply and financial disintermediation, long-term bond yields continued to decline rapidly, hitting a 20-year low, accumulating the risk of a bond market reversal.

To this end, the central bank has made multiple public warnings of risks in the early stages, and announced on July 1 that it would carry out treasury bond borrowing operations to increase bond market supply.

The central bank's new move this time can effectively release the market's existing long-term bonds and further increase the scale of tradable bonds.

Currently, the MLF balance exceeds 7 trillion yuan, and most of it is pledged with treasury bonds and local government bonds. If participating institutions reduce or waive collateral and sell long-term bonds, a large number of bonds will be released, effectively alleviating the pressure of "asset shortage" in the bond market.

“Long-term bond market risks still need attention.”Experts said that the domestic economy faces some challenges in the short term, but in the medium and long term, the goal of doubling the total economic volume and per capita income will be achieved by 2035.GDPGrowth will remain around 8%.

When deciding whether to hold a large number of long-term bonds with low coupon rates, institutions need to conduct stress tests based on this situation and fully consider interest rate risks to avoid repeating the mistakes of Silicon Valley Bank in the United States and Norinchukin Bank in Japan.

Industry insiders pointed out that the central bank actively promotes the development of over-the-counter treasury bonds and supports the public in investing in and holding treasury bonds.

Government bonds have no credit risk. For long-term government bonds, changes in interest rates can cause large price fluctuations. For public investors, if they need money for various reasons before maturity, they may incur large investment losses when selling government bonds in the secondary market.

Financial institutions should also fully disclose interest rate risks and price risks when selling long-term government bonds.

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