Event: on April 15, the people's Bank of China carried out 150 billion yuan medium-term loan facilitation operation and 10 billion yuan open market reverse repurchase operation, and the bid winning interest rate remained unchanged. In addition, the deposit reserve ratio of financial institutions was reduced by 0.25 percentage points. In order to increase the support for small and micro enterprises and "agriculture, rural areas and farmers", for urban commercial banks that do not operate across provinces and rural commercial banks with a deposit reserve ratio higher than 5%, on the basis of reducing the deposit reserve ratio by 0.25 percentage points, an additional 0.25 percentage points will be reduced. This reduction will release a total of about 530 billion yuan of long-term funds.
What is the purpose of this RRR reduction? While alleviating the cost pressure of enterprises, stabilize market confidence. First of all, the economic data in March showed obvious signs of decline under the impact of this round of epidemic, including the PMI falling below the boom and bust line this month and the negative import growth rate, all indicating the intensification of weak domestic demand. In addition, in the financial data of March, the main driving forces of wide credit are bills and short-term loans, and the medium and long-term loans of residents and enterprises have not been significantly improved. Therefore, this RRR reduction can not only alleviate the financing pressure of small and medium-sized enterprises, but also form a continuous impetus to wide credit. Secondly, the failure of interest rate and reserve requirement reduction in March has led some markets to doubt the strength and sustainability of "stable growth". This month's reserve requirement reduction is enough to alleviate market concerns and stabilize market expectations.
Then why is the strength lower than expected? Mainly external constraints. From the perspective of liquidity, it is relatively abundant at present, dr007 is at a low level, and the cost performance of reducing reserve requirement by 50bp is not high. From the perspective of external influence, in the first half of the year, the pace of interest rate increase and table contraction of the Federal Reserve was fast, and the nominal interest rate difference between China and the United States in the past 10 years has fallen into negative value. Although China's external toughness (balance of payments and exchange rate) is strong, there is also a marginal downward trend, and the interest rate difference between China and the United States restricts the space of China's monetary policy. In terms of price level, under the background of weak demand, the conflict between Russia and Ukraine remains uncertain, and the price of bulk commodities fluctuates greatly. Superimposed on the low base effect of last year, China's CPI has entered an upward trend, and the importance of maintaining price stability has increased.
How to interpret the follow-up policies? Fiscal coordination with money also restricts money. First, the aggregate monetary policy has gradually bottomed out, but there is still room. Under the disturbance of the epidemic, the fundamental recovery still needs time. This RRR reduction is lower than expected, which does not rule out leaving room for subsequent monetary policy. Secondly, structural policies will certainly increase. The determination of "steady growth" remains unchanged, and the implementation of refinancing, rediscount and inclusive small and micro loan support tools can be expected to alleviate the financing difficulties of key areas and industries. Third, follow up on the stimulus policies related to real estate and consumption. At present, the strength of real estate policy is limited, and it is still focused on guaranteed housing, which is difficult to reverse the confidence of enterprises and investors in the short term; The fermentation of the epidemic not only has an impact on the income side of residents, but also leads to a reduction in consumption willingness. The loose monetary policy alone has little effect on boosting consumption. Fourth, the effect of fiscal power determines the degree of monetary policy easing. After financial institutions turn in profits, if the fiscal leverage is significant and the supply force of credit is gradually transmitted to the demand side, the necessity of further force of monetary policy decreases.
What will happen to asset prices? The bond market plays a game between wide currency and wide credit. The RRR reduction was lower than expected, and the correction pressure of the short-term bond market increased. However, in the medium and long term, the core negative factors of the bond market still depend on when the broad credit will stabilize. A shares are still in the bottom grinding stage. The risk appetite of A-Shares has not improved significantly. On this basis, China's fundamentals, policies, external conflicts between Russia and Ukraine and the rapid rise of US bond yields have greatly disturbed its emotional side. The pressure of RMB exchange rate depreciation has intensified but limited. On the one hand, the demand for foreign exchange settlement and sales of China's current account is strong in the short term. On the other hand, the real interest rate difference between China and the United States is still high, and the difference in economic fundamentals between China and the United States supports the RMB.
