In the next 1-2 weeks, the landing probability of comprehensive RRR reduction is high
On December 3, 2021, Li Keqiang met with georgiyeva of the International Monetary Fund in Ziguangge, Zhongnanhai, and said that "the reserve requirement should be reduced in due time". Looking back on history, Li Keqiang publicly said that after the "RRR reduction", there was only one failure, that is, the national standing committee meeting on June 17, 2020, and the RRR reduction was implemented after other previous statements.
This statement was not an occasion such as the executive meeting of the State Council, but there were precedents to follow: on December 23, 2019, Li Keqiang visited the Bank Of Chengdu Co.Ltd(601838) Free Trade Zone Branch and said that "the state will further study and take various measures such as RRR reduction, targeted RRR reduction, refinancing and rediscount". On January 1, 2020, the central bank announced a comprehensive RRR reduction.
"Broad money" is the proper meaning of "steady growth"
Many market views believe that "broad money" has no direct effect on economic growth, but we don't think so. "Broad money" has three meanings:
1. Release a clear signal of "steady growth"; 2. Reduce the debt cost of banks and real economy; 3. Provide supporting support for other measures to stabilize growth.
"Broad money" is a normal operation for "steady growth". "Broad money" is the proper meaning of "stable growth", and "stable growth" without "broad money" is unreasonable.
The current economic growth rate is still lower than the potential economic growth rate, and the "steady growth" policy is likely to increase in 2022. We maintain the overall RRR reduction + 5-10bp symbolic interest rate reduction expectation unchanged.
RRR reduction is not just "neutral"
From the narrow liquidity level, RRR reduction can be said to be neutral, that is, whether through RRR reduction, MLF and refinancing to supplement the base currency, we can maintain "reasonable and sufficient liquidity"; However, for the market, RRR reduction is not neutral.
Whether there is a RRR reduction does reflect the attitude of the policy level and the central bank, and the market will respond to it. The yield fell sharply in July, mainly driven by the higher than expected landing of RRR reduction; The yield rose sharply in October, which was mainly driven by the failure of RRR reduction.
The market may regenerate the expectation of "wide currency", and the restart of the debt bull continues
At present, the market's expectation of "wide currency" is very weak. The general expectation is "wide credit + wide finance". At the same time, some expectations are "wide real estate", while the general expectation of currency is "stable currency". The main reason is that the reduction of reserve requirement in October failed, resulting in a sharp decline in the market's expectation of "wide currency" of the central bank.
If the RRR reduction can be implemented, it will be a big expected difference. The impact on the bond market is not just a RRR reduction, but the opening of the imagination space of "wide currency" in 2022.
In March, we proposed "the debt Bull has arrived" and in October, we proposed "the restart of the debt bull". The report "objective evaluation of Omicron epidemic" on November 28 reminded the short-term adjustment risk of the bond market, and stressed that "if the bond market has a correction, it is a new opportunity to increase positions".
At the current time point, we judge that "the resumption of the bond bull market continues", and it is expected that the ten-year Treasury bond will decline to 2.6-2.7% in the first quarter of 2022.
Risk tip: policy changes exceed expectations.
