Event: in May, the 1-year LPR reported 3.7%, and the previous value was 3.7%; Varieties with a maturity of more than 5 years reported 4.45%, and the former value was 4.6%.
Different asymmetric interest rate cuts. This month, the interest rate of more than five-year LPR was significantly reduced by 15bp, while the interest rate of one-year LPR remained unchanged. This interest rate reduction is "unprecedented". First of all, this interest rate cut is the first time that the central bank has only reduced the LPR interest rate for more than 5 years, while maintaining the one-year LPR interest rate unchanged; Secondly, from the end of 2019 to now, after several rounds of adjustment, the overall downward range of 5-year LPR interest rate is only 20bp, and the single reduction of 15bp shows the great strength of the policy; Finally, under the new mechanism of the market-oriented reform of the central bank's deposit interest rate, the weighted average interest rate of national financial institutions in the last week of April decreased by about 10bp compared with the previous week. Driven by the reduction of the cost of bank liabilities, the MLF interest rate has remained unchanged recently, while the LPR has taken the initiative to reduce. On the one hand, personal housing loans account for a relatively high proportion of loans with a term of more than five years, and the LPR interest rate for loans with a term of more than five years has been significantly reduced, which shows that the policy level has strengthened its determination to stabilize real estate and increased support for the demand side of the real sector. On the other hand, the debt side cost of financial institutions has decreased significantly in the early stage. On the basis of the decline of deposit interest rate in the early stage and the release of long-term funds of about 530 billion yuan by reducing the reserve requirement in April, the cost of bank liabilities has been significantly reduced, and how to solve the problem of insufficient effective demand is the policy force.
The mortgage interest rate may approach 2017. Under the background of the deepening impact of China's epidemic on the economy, the downward pressure on the economy has increased. On the one hand, due to the impact of the epidemic, industrial production has further slowed down and the investment side has also weakened in an all-round way; On the other hand, the consumption growth rate continued to decline in April, and the year-on-year growth rate of real estate sales area further expanded. In addition, the weak data of social financing and credit in April, the significant negative year-on-year increase of new housing loans in the residential sector and the continuous decline of the difference between social financing and M2 growth reflect the weakness of financing demand suppressed by factors such as the epidemic. Meanwhile, in April this year, the urban survey unemployment rate rose to 6.1%, and the employment situation of residents was under pressure, which further weakened expectations. We pointed out in the previous report "residents leverage or make a comeback" that in order to complete the economic tasks of the whole year, in addition to the government, other departments also need to leverage. From the perspective of the empirical law of the change of leverage ratio of various departments, it is difficult for enterprises to add leverage alone. Residents must add leverage to cooperate, and the focus of residents' adding leverage lies in real estate. In the first quarter monetary policy implementation report, the central bank stressed that "support all localities to improve real estate policies based on local conditions and support rigid and improved housing demand". Previously, the loose adjustment of the lower limit of housing loan interest rate and this interest rate cut were expected to improve real estate sales, so as to maintain a reasonable range of economic growth. We believe that under the background of the continued downturn in the demand and expectation of the physical sector, it is necessary to increase the credit policy. The first mortgage interest rate disclosed by rong360 in March was 5.28%. If the two interest rate cuts were combined, it means that the first mortgage interest rate would be reduced to 4.93%, which basically returns to the mortgage interest rate level in the middle of 2017.
The sustainability remains to be seen, and monetary policy focuses on "expansion". In the context of increasing downward pressure on the economy, interest rate cuts can drive the recovery of credit to a certain extent and play a role in stabilizing growth and ensuring employment. However, considering that the spread of the epidemic in China has not ended and the risks in the real estate industry have not been fully released, from the pressure of the economic environment, more policies to stabilize growth are still needed to achieve the goal of annual economic growth. We believe that the focus of the follow-up monetary policy may be to continue to promote the growth of credit scale, and the probability of continuous interest rate reduction is small: on the one hand, housing loan is one of the most high-quality assets of commercial banks. From this perspective, such a strong interest rate reduction is likely to hope to "finish its work in one battle"; On the other hand, the central bank eased the three major constraints on the liquidity, capital and interest rate of bank credit supply, and continuously launched various special refinancing tools to guide the increase of credit supply. In addition, the fast pace of interest rate increase and contraction of the Federal Reserve may restrict the exchange rate and capital flow.
The interest is concerned about the post cycle consumption, and the bond market is cautious. The sharp reduction of the 5-year LPR interest rate can promote medium and long-term loans to a certain extent. For asset allocation, historically, interest rate cuts often lead to the periodic decline of bond yields. However, the 5-year LPR interest rate adjustment is large, but MLF interest rate is not reduced at the same time, which means that banks have to absorb most of the cost of interest rate cuts. In the case that the cost of capital has not decreased, and the policy effect is focused on driving the improvement of real estate to stabilize the economy, the bond market may face adjustment pressure, and it is still recommended to be cautious in the short term. Relatively speaking, the equity market may benefit more. If the follow-up trend of the epidemic does not change, and with the improvement of basic data such as real estate sales and investment, the "de inventory" of real estate enterprises may drive the improvement of optional consumption in the later cycle.
Risk tip: policy changes, economic recovery is less than expected.
