The Central Bank Has Not Fought Like A Drop In Interest Rates.

In order to maintain a reasonable and abundant liquidity in the banking system, the people's Bank of China carried out a MLF operation of 21 Financial Institutions for a total of 290 billion yuan, of which 3 months were 175 billion yuan and 6 months 115 billion yuan, and the interest rates were flat and 2.75%, 2.85%, respectively, guiding financial institutions to increase their support for the key areas and weak links of the national economy.

On the same day, the central bank carried out a 45 billion and 7 day reverse repurchase operation in the form of interest rate bidding, winning the bid rate of 2.25%.

In view of the fact that 20 billion counter repurchase expires on that day, a small net amount of capital was still put into operation that day.

Why do we need to release water?

Background 1:

In May 13th, the central bank released the April 2016 financial statistics report. The data show that in April, RMB loans increased by 555 billion 600 million yuan, 817 billion 300 million yuan less than last month and 152 billion 300 million yuan in the same period last year, and the increment of social financing scale was 751 billion yuan, which was 1 trillion and 650 billion yuan and 307 billion 200 million yuan less than that of last month and the same period last year.

This data can easily lead to speculation about monetary tightening, which is interpreted as a change in monetary policy, causing panic.

To this end, 14 days ago, the central bank website issued the central bank responsible person on April major financial data and the current monetary policy orientation to answer reporters' questions.

The central bank said that the orientation of sound monetary policy has not changed.

After adjusting for seasonal factors and factors such as the issuance of local government bonds and debt replacement, the total amount of money and credit and the scale of social financing are still stable and normal, and the liquidity of the banking system is reasonable and abundant.

It also keeps running smoothly at low position.

Background Two:

In April, the economic data fell across the board. The latest statistics of the National Bureau of statistics showed that compared with the first quarter, the data in the first quarter were improving, and the economic data in April almost fell across the board.

According to the data released by the National Bureau of statistics, from the "three carriages" of traditional economic growth, the export growth rate dropped from 18.7% in March to 4.1%, the consumption growth rate dropped from 10.5% to 10.1%, and the investment growth rate also dropped from 10.7% to 10.5%.

In addition, the hidden concerns of private investment before this month are also reflected in the same month's data.

In the 1~4 months of this year, China's private investment increased by 5.2%, a 0.5 percentage point drop from the first quarter, which is 5.3 percentage points lower than that of all investment growth.

There are also weak industrial data. In April, the added value of above scale industries increased by 6% over the previous year, less than 6.5% of expected value, and also lower than the previous value of 6.8%.

It is against this background that the central bank has carried out MLF operation.

On the one hand, it shows that the orientation of prudent monetary policy has not changed.

On the other hand, it also hopes to boost the economy and boost people's confidence in China's economy.

Will this lead to the formation of "flood irrigation" by authoritative people?

In May 9th, the front page of the people's Daily published an interview with authoritative sources about current economic articles.

In this interview article, the authoritative figures not only expressed the view of China's economic L type, but pointed out: China's economic operation can't be U and V, but the trend of L.

The L trend is a phase, not one or two years.

Moreover, the authority also said that there should be no need to increase economic growth by means of leverage, and avoid using the "flood irrigation" expansion method to stimulate the economy, resulting in short-term excitement.

Worse and worse.

First of all, the "MLF+ reverse buy back" regulation is a way to maintain the stability of the capital market in the interbank market.

Data show that this week's open market will have 250 billion counter repurchase expires, while 47 billion 500 million of the medium-term loan facility (MLF) expires.

Therefore, in order to maintain the stability of market funds, it is normal for the central bank to adopt the "MLF+ reverse repurchase" regulation mode, which is actually a specific way to maintain monetary policy stability.

Secondly, on the authority's "flood irrigation", the key is to have moderate problems, which is also repeatedly emphasized by authoritative figures.

The "authority" interview focused on macro policy, including "excessive" monetary policy, excessive stimulation, flood irrigation rather than any stimulus, and even tighter monetary policy in the downside of the economy.

If the "authoritative people" stress the structural reform of the supply side, oppose high leverage, warn risks, distort them as "authoritative people", oppose any stimulus, oppose loosely and oppose investment, which is obviously contrary to the original intention of "authoritative people".

Therefore, we can not equate the central bank discharge with the "flood irrigation".

The central bank's drainage will have a positive impact on the stock market, but this effect is relatively limited.

After all, the central bank does not put water directly into the stock market.

It is actually an indirect benefit to the stock market.

In the medium to long term, the impact of the central bank's drainage on the stock market is negligible.

The problem of China's stock market is not a lack of water, but a lack of confidence.

As long as investors are full of confidence in the stock market, all kinds of funds in society will be uninvited.

On the contrary, investors do not have confidence in the stock market, and social capital is abundant, and it will not flow into the stock market.

After the Spring Festival this year, the hot money in the society is crazy about real estate, and the stock market basically has only a dry look.

Therefore, the problem of China's stock market is to restore investor confidence.

And how to restore investor confidence requires a lot of work done by the stock market regulators and even the Chinese government.

From the MLF operation of the central bank, it is easy to associate with the drop in accuracy problem.

Because MLF is known by some people in the industry as a quasi standard or a substandard product.

Therefore, in the face of MLF operation, some experts or agencies recommend lowering the standard.

I personally do not support dropping the standard.

I support the central bank's use of MLF instead of lowering the quota.

Because the MLF operation can satisfy the requirements of the current central bank to stabilize interest rates, and does not directly put the underlying currency into the market, this is a two way approach.

It embodies the adjustment of the basic policy of our monetary policy, that is, maintaining pressure, directional regulation, adjusting structure, and presetting and fine-tuning.

Reduction will result in

"Too loose", which is easy to see the authority of the "flood irrigation" situation.

For example, this will stimulate the rise of housing prices, resulting in a false rise in demand for some industries with excess industries, such as steel, leaving worries behind the supply side reform.

Moreover, China's housing prices have kidnapped the Chinese economy. If the Chinese economy can not extricate itself from this cross, China's economy can only go to a blind alley.

Therefore, in emphasizing the adjustment of economic structure, monetary policy must not be too lenient.

The lessons left by the 4 trillion stimulus measures to the Chinese economy in 2009 must never be repeated.

Therefore, in terms of prudent monetary policy, we must use caution to reduce the interest rate and reduce interest rates.

What does a noun explain to MLF?

What is reverse repurchase?

We know that the buy back is collected, as the name suggests, the reverse repo is put out.

The reverse repurchase is the financial sector that gives financial financial input to the financial input, collateralized the securities as a mortgage, and retracted the principal and interest in the future, and relieved the paction of the mortgage of the securities.

The central bank's reverse repurchase buys the securities for the people's Bank of China to the first class dealers, and stipulations that the sale of the valuable securities to the first class dealers will be carried out on a specific date in the future. The reverse repurchase will provide liquidity for the central bank to the market, and the repurchase expires will be the operation of the central bank to recover liquidity from the market.

A simple explanation is that the initiative to borrow funds, the bond pledge paction is known as the reverse repo paction. At this time, the central bank acts as an investor, accepting bonds and lending funds.

MLF: Medium-term Lending Facility (MLF) was created by the people's Bank of China in September 2014.

The medium-term loan facility is a monetary policy tool provided by the central bank to provide the medium term basic currency. The commercial banks and policy banks that meet the requirements of macro Prudential management can be carried out through tendering.

The way of issuance is the way of pledge, and we need to provide high quality bonds such as treasury bonds, central bank bills, policy financial bonds and high-grade credit bonds as qualified pledge.