2014-02-12

Chinese Reverse Repos Mature This Week

Chinese monetary policy is on pace to auto-tighten this week as reverse repos mature.

China Money Rate Rises Before Reverse Repos Mature; Swap Steady
A total of 450 billion yuan ($74 billion) of 14- and 21-day reverse repos will fall due next week, according to data compiled by Bloomberg.
This article is from last week; next week is now.

This article (Google Translated) discusses analyst opinion in China. Will the PBOC tighten further in the Year of the Horse, or move towards neutral? 央行首周“静默”:马年延续偏紧信号?
(Central Bank of the first week, "silent": Horse continuation of tight signal?)

Tuesday is the first day after the central bank open market operations, the Chinese New Year Year of the Horse, but the face of the huge reverse repurchase expires, the central bank did not rush to start a new round of reverse repurchase fill the gap, but chose to let the natural return of capital.

Market analysts generally believe the central bank to take monetary policy signals the release of this year - still continued tight policy steady in 2013.

450000000000 reverse repo maturity

Wind Information Statistics show that on February 7 to 14 week as of now there are 450 billion central bank reverse repo operations expires in mid treasury deposit another $ 30 billion will expire on February 15 (Saturday , postponed to February 17) will face the reserve in back. The above circumstances will directly reduce the inter-bank market liquidity.

However, since the first week after the holiday is also the beginning, not the demand for funds, the central bank's "omission" does not cause excessive reaction of the market on Tuesday, the short-term repo rate is still down. Moreover, on the previous trading day inter-bank market each period repo rate also showed a downward trend shock, indicating short-term inter-bank liquidity is relatively abundant.

"This is the first week after the holiday less about funding needs, but given this week to tighten liquidity factor overlay, is expected to be slightly this week, the central bank's reverse repo operations." A fixed-income analyst at brokerage accept the "first Financial Daily "reporters, said an interview.

The face of 450 billion yuan reverse repo operations expires, senior analyst at Bank of Dongguan Financial Markets Chen expectations: "The central bank will conduct a short-term or 2 times the reverse repo operations, the total size or 150 billion to 2000 billion yuan In return some liquidity to calm markets, while psychological and emotional to smooth market volatility. "

Every Tuesday, Thursday the central bank open market operations window of time, if you want to open operation, conducted on Monday and Tuesday the central bank will exercise the amount of major financial institutions. However, from the current situation, this week's operating window only next Thursday, but the current market funds face and do not support large-scale reverse repurchase operations on Thursday might.

The central bank to release tight signal?

Emerging markets affected by the current economic chaos and weak Chinese data, there are institutions began to prophesy policy the central bank might adjust its tight neutral.

Haitong Securities analyst Jiang Chao macroeconomic policies of this analysis, "the central bank stressed that 'forward-looking' again, contact its emphasis SLF's routine, or indicate a neutral policy orientation has been transferred from tight to prevent systemic financial risks. "

Standard Chartered Bank in its 2014 Investment Outlook report, "if the economy weakens significantly, would be expected to loosen fiscal and monetary policy at the same time as needed to avoid a hard landing."

But on Tuesday the central bank is still facing a huge amount of reverse repurchase expires window closes its open market operations are considered to adhere to some extent the central bank to release tight monetary policy signals to the market.

Solid closing a brokerage analyst on the "First Financial Daily" reporters, said face massive reverse repurchase expires, the central bank did not restart the central bank may help reverse repo market is relatively calm period of tight release signal to the market.

Dongguan bank liquidity report also predicted a few days ago: "fallout effect late last year put the focus on fiscal deposits, 2.77 trillion yuan more than the incremental foreign exchange market is tight and the expectations and the central bank requires commercial banks to take the initiative to improve under the allowance ratios such short-term liquidity of commercial banks is relatively abundant, so the central bank more reason to have tight operating base return efforts. "

China Merchants Bank senior analyst Liu Dongliang said, "the central bank to ease monetary policy should not hold too high expectations."

Dong-Liang Liu believes that the current central bank did not achieve their full social debt limit excessive risk expansionary monetary policy goals, but did not alleviate the current funding, and the economic downturn of the funds used to increase the real economy, local government financing to maintain growth momentum is strong, In this case, once the easing of monetary policy, credit expansion will continue; another current economic downturn, although the consensus, but there is no difference to the situation and the central bank shots.

A leading domestic fund companies also said that "the central bank's concerns about the economy deepened last year's fourth quarter, easing slightly to tighten attitude, but by no means the central bank should be substantially relaxed.

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