Short-term funds "cut off" waiting for the RRR to be replenished

Continuing the situation since last week, on Monday, the market for the OTC market was relatively tight, and the short-term money market interest rate hit a new high. Market participants pointed out that the large amount of tax paid by enterprises is the driving force for the tightening of funds. It is also related to the lack of institutional response and the resumption of leverage. In the follow-up, with the implementation of RRR cuts and the increase in fiscal expenditure at the end of the month, the funding situation is expected to ease. However, in the future, we should pay attention to and strengthen liquidity management.

Liquidity suddenly "not flowing"

“Since last Tuesday, the funds have been tightened sharply, and after a few days, they are extremely nervous.” Bond market traders said that since last week, the repo market has piled up and piled up, with very little melting and a small amount of melting soon. After being robbed, the price of funds soared.

It is understood that last week, the bank's overnight repo rate has reached a high of 10%; this Monday, further rose to 18%.

Money intermediaries said that the funds were still tight on Monday. In the morning, a large amount of 7%-10% of the overnight high price was included in the offer, but the fund-raising party was few. In the afternoon, there was almost no offer, and all overnight funds within 15% could be quickly sold. The deal was 18%.

According to market sources, some institutions on Monday failed to borrow funds.

However, where the funds are tight, the increase in the interest rate of funds is basically a standard, and the rise is fierce. The higher the increase, the tighter the funding. However, defaults on repo transactions are not common. In particular, some institutions have defaulted on transactions, which will only occur when the funds are extremely tight.

“Monday default is related to a problem with a settlement institution system, but the key is that the funds are too tight, and the market participants are caught off guard.” A person from the asset management agency said that the market was obviously inadequately prepared for the fluctuation of the funds. So nervous.

Since the beginning of this year, the funds have been very loose, and the interest rate of the money market has generally fallen. In the first half of April, the funds were still calm, and the repurchase rate for some periods also hit a new low for more than a year. Since last week, short-term funds have suddenly “broken out”, resulting in dramatic changes in funding.

Alarmed the market

The recent market capital shortage is caused by many factors.

First of all, the amount of tax paid in April is large. Second, the central bank has returned a lot of funds. Moreover, before the funds were too loose and optimism rose, some institutions relaxed their liquidity management and the phenomenon of “rolling overnight” reappeared. Under the circumstances that the funds continue to exceed the expected easing, everyone is "rolling overnight". Once the big line does not go out overnight, the funds can not continue, and tension is inevitable. At the same time as "rolling overnight", there are also institutions that "add leverage." In the first quarter, non-bank institutions bought a lot of bonds and re-added leverage, which reduced the tolerance of fund fluctuations.

Although the funds are extremely tight, it may not last for too long. The tax disturbance will be weakened this week. The implementation of the RRR cut is imminent, and the financial expenditure at the end of the month is extremely strong. The capital fabrics will be “rainy and sunny”.

The central bank said that this time it is a partial reduction of "partial financial institutions" to "replace medium-term lending facilities", but the actual coverage is large, and the RRR is not small. At the same time that it replaces about 900 billion yuan of MWF with a relatively high interest rate. It will also release 400 billion yuan of incremental liquidity.

The essence of this RRR reduction is to replace the short-term and higher-cost funds previously borrowed by the bank from the central bank with long-term, low-cost funds, which is a substantial positive for the funds.

At the same time, at the end of the month, fiscal expenditure will increase, and liquidity will be increased. The impact of fiscal revenue and expenditure on liquidity will also change positively. Therefore, this week's liquidity easing is still a high probability event.

However, this time the funding is tight, the market has sounded the alarm. Analysts believe that this year's funding will be better than 2017, but it can't be expected too high. De-leverage and steady growth should be grasped by both hands, not to mention the various tests of narrowing the spread between China and the United States and inflationary pressures. The currency will not be loose, and the interest rate of funds will not fall too much.

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