On April 3, the Shanghai Stock Exchange's general pledged reverse repurchase GC004 closed at 0.965%, with an intraday low of 0.01%. This price is even lower than the overnight term rate. On that day, GC001 on the Shanghai Stock Exchange reached an intraday low of 0.630% and closed at 0.995%, a decrease of 11.56% from the previous day. Shenzhen Stock Exchange R-001 fell as low as 0.630% during the session and closed at 0.975% that day, a decrease of 11.36% from the previous day.
In fact, if you trade at a price of 0.01% annualized return, after deducting transaction fees, you will actually lose money. But there are still people doing this kind of loss-making business.
"I have discovered this situation before. It may be that the customers doing this business do not know how to charge fees." A senior bond private equity investor told the "Daily Economic News" reporter.
The closing price of universal pledged reverse repo with an overnight term fell below 1%
GC004 is a 4-day universal pledged reverse repurchase of the Shanghai Stock Exchange. Based on the annualized rate of return of 0.01%, taking the funds lent on April 3 as an example, since it coincides with a three-day legal holiday, the actual number of interest-bearing days after the loan is 6 days, so the actual investment rate of return for this transaction is 0.01% × 6/365 = 0.00016%. The GC004 transaction fee of a certain brokerage is 0.004%. Accordingly, the investment result at a price of 0.01% is no profit but loss.
Faced with such low annualized returns, it is often natural to give up on the deal. But in fact, this kind of obviously losing transaction happened.
According to the trading situation of GC004 on April 3, when the market closed that day, starting from 15:27, multiple transactions were completed at a price of 0.01%. It was not until close to 15:29 that the price began to rise, and finally closed at 0.965%.
In fact, since April, money market prices have trended downward for several consecutive days, and the price of overnight funds has now fallen below 1%.
GC001 closed at 0.995% on April 3 and closed at 1.125% on the previous day. On April 3, R-001 closed at 0.975% and closed at 1.1% the previous day.
Lower capital prices indicate that market capital is relatively abundant. The Mingming team, chief economist of CITIC Securities, told reporters that in April, the funding situation is quite loose. On the one hand, funds have ended across the month, and banks’ quarterly liquidity assessment has come to an end, and liabilities are relatively abundant; on the other hand, April is often a small month for credit, and the annual special government bond issuance plan has not yet been announced. The current asset shortage pattern in the bond market continues.
Open market operations are at their smallest ever recorded
The reporter noticed that since April, as the banking industry's capital demand dropped at the beginning of the month, the liquidity of the capital market has become more abundant, and the volume of reverse repurchase operations in the open market business has been below 1 billion yuan for several days.
Wang Qing, chief macro analyst of Oriental Jincheng, analyzed that on April 1, a 7-day reverse repurchase of 500 million yuan was carried out in the open market, which was the smallest scale recorded since the reverse repurchase became a routine operation in 2015. On that day, a corresponding reverse repurchase of 78.5 billion yuan expired. Based on this calculation, the net withdrawal in a single day was 78 billion yuan.
Wang Qing judged that on April 1, the central bank launched the smallest 7-day reverse repurchase in more than 10 years. The direct reason was that the recent funding situation has continued to be stable and loose, coupled with the widening liquidity at the beginning of the month; at the same time, this also released a signal to guide the stability of market liquidity and avoid excessive downward deviation of major market interest rates from policy rates, which helped stabilize market expectations.
Overall, Wang Qing pointed out that, mainly due to the central bank's comprehensive use of MLF and buyout reverse repurchase to provide a large-scale net injection of 1.9 trillion yuan in mid-term liquidity from January to February, as well as the low net financing scale of government bonds in March, the recent funding situation has continued to be stable and loose; near the end of the month and quarter, the central bank increased short-term capital injection through pledged reverse repurchase, which also effectively suppressed funding fluctuations. Wang Qing judged that in the process of sudden increase in external uncertainty caused by the evolution of the situation in the Middle East, domestic monetary policy at this stage will take maintaining sufficient liquidity and stabilizing market expectations as important goals. This may be a background for funds to become loose at the end of the month and quarter.
Wang Qing reminded that it is worth noting that amid the recent stabilization and loosening of funds, the central bank's mid-term liquidity net withdrawal was 250 billion yuan in March, aiming to guide major market interest rates to fluctuate within a reasonable range around the policy interest rate. As a result, we cannot rule out the possibility that outright reverse repurchases will continue to implement net withdrawals in April, and the average interest rates in major markets such as DR007 and 1-year commercial bank (AAA-rated) interbank certificates of deposits will stabilize or rise slightly.
Wang Qing said that the evolution of the situation in the Middle East since the end of February has driven up international oil prices sharply, and the overall domestic price level has shown a strong upward trend in March. At the same time, this will also cause certain disturbances to the economic growth momentum. In the short term, amid the sudden increase in external uncertainty, domestic monetary policy will gradually tilt towards stabilizing prices while maintaining ample market liquidity, and the timing of interest rate cuts may be delayed. If external shocks intensify the disturbance to domestic economic growth in the later period, monetary policy will correspondingly increase appropriate easing efforts.
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