with the release of the latest monetary policy implementation report, the market’s expectation of the possible contraction of MLF in August has further increased. < br > < div class =" height "> < / div > in the second quarter of 2022 China’s monetary policy implementation report released on the evening of August 10, the central bank stated that it” maintains reasonable and sufficient liquidity ” At the same time, it also proposes to pay close attention to the changes of various uncertain factors at home and abroad, deeply study and judge the supply and demand of liquidity in the banking system, improve the forward-looking, flexible and effective operation, stabilize market expectations, and balance internal and external balance< Br > < div class = "height" > < / div > the MLF (medium term loan facility) of 600 billion yuan will expire next week. Since April, the central bank has continued the “equivalent amount” operation in the MLF operation in the middle of the month for four consecutive months. However, against the background of continuous easing of liquidity in the inter-bank market and in combination with the latest statement of the central bank, many institutions expect that MLF will shrink this month< Br > < div class = "height" > < / div > Wen bin, chief economist of China Minsheng Bank, pointed out that under the environment of abundant liquidity in the early stage, the continuous ultra-low operation of the money market interest rate has led to the rapid rise of repo leverage. Since the first ten days of August, the daily trading volume of R001 has exceeded the high level of 6 trillion yuan. The high leverage ratio will amplify the risk of capital interest rate fluctuations. For this reason, the central bank proposed to “deeply study and judge the liquidity supply and demand of the banking system, improve the forward-looking, flexible and effective operation, and stabilize market expectations”. On the basis of the continuous “low volume” operation of reverse repo in the early period, it is not excluded that MLF will continue to operate in a small amount in August, release the convergence signal at the margin, and continue the net withdrawal in the MLF operation in the subsequent months, gradually guiding the capital interest rate to converge to the policy interest rate< br>
“The monetary policy needs to pay attention to the rapid rise of repo leverage caused by the continuous ultra-low operation of Dr. since the first ten days of August, the daily trading volume of R001 has exceeded 6 trillion, which will aggravate the vulnerability of the inter-bank market. Once the future liquidity appears marginal convergence, the high leverage ratio will lead to a large fluctuation of the capital interest rate. We judge that the central bank may take corresponding measures to deal with it: on the one hand, the overnight capital financial inflow of large state-owned banks Give corresponding guidance. On the other hand, in August, the MLF expired at 600 billion yuan, and the treasurer’s willingness to continue is weak. It is not ruled out that the central bank will reduce the amount of renewal and release the convergence signal at the margin. ” Wang Yifeng, banking analyst of Everbright Securities, pointed out in the research report< Br > < div class = "height" > < / div > the central bank’s explanation of the reduction of reverse repo in July also intensified the expectations of institutions on the possible reduction of MLF< Br > < div class = "height" > < / div > according to the report, as the number of bids from primary dealers continues to decrease, the central bank will further reduce the amount of reverse repurchase operations, but it still fully meets the needs of bidding institutions< Br > < div class = "height" > < / div > in this regard, the fixed income team of Huachuang Securities believes that the latest monetary policy implementation report says that the reduction of reverse repo is caused by demand, and the central bank is more “passive” response than active reduction to release tightening signals. The explanation of this report may ease the market’s worry. Even if there is a reduction of MLF in August, the market can extrapolate it, and it is understood that the demand is insufficient and the expectation may be stable< Br > < div class = "height" > < / div > “even if the MLF contraction continues next week, it can also be interpreted as the decline in market demand. Only when we see the changes in the capital level that it actually brings, we need to further analyze the state agreed by the central bank. Since the current short-term interest rate is not extremely priced, if the capital interest rate continues to maintain at the current level, there is still room for the short-term interest rate to fall.” Cinda Securities believes that.