Events
On the 20th, the central bank announced the LPR interest rate in May. Among them, the quotation of one-year LPR is 3.7%, which remains unchanged in the previous month; The five-year quotation is 4.45%, a decrease of 15bp compared with the previous one.
Core view:
The asymmetric reduction of LPR exceeded market expectations. As the central bank has lowered the lower limit of individual housing loan interest rate of the first commercial housing by 20bp on the 15th, the market generally expects that the five-year LPR as the "anchor of housing loan" will remain unchanged this time. However, the central bank has carried out asymmetric "interest rate reduction" operation, which may be due to the following considerations:
First, implement 4? 29 policy requirements of the Politburo meeting on stabilizing the property market. 4？ The Politburo meeting emphasized "effective control of key risks and keeping the bottom line of no systemic risks", and focused on three risk areas: real estate, capital market and platform economy. On May 5, the CSRC held a special meeting to study and deepen the reform of the capital market, maintain the stable operation of the capital market, and plan policies and measures to stabilize the capital market; At the special consultation meeting on "promoting the sustainable and healthy development of digital economy" held on the 17th, vice premier Liu he released a positive signal to support the platform economy. Capital market and platform economy, the policy is warm.
Stabilizing the real estate market ranks first among the three major risks. The Politburo meeting called for "supporting rigid and improved housing demand and promoting the steady and healthy development of the real estate market", highlighting the significance of real estate to stabilizing the macro economy under the current situation. As early as the "financial Article 23" issued at the end of April, the central bank's regulation attitude towards real estate has changed, and the macro Prudential policy of housing finance has been adjusted. However, high-frequency data showed that the national real estate sales situation did not improve significantly in May. From May 1 to 18, the transaction area of commercial housing in 30 large and medium-sized cities was 4.692 million square meters, an increase of only 8.3% over the same period last month, far less than the monthly decline of 16.5% last month. In this regard, the central bank and the China Banking and Insurance Regulatory Commission issued a notice on the 15th, reducing the lower limit of mortgage interest rate by 20bp, and this time guiding the five-year LPR to reduce by 15bp, with obvious intention to stabilize the property market.
Second, reduce the housing loan pressure of residents during the anti epidemic period and promote the recovery of consumption. Compared with lowering the lower limit of mortgage interest rate, lowering the five-year LPR interest rate can not only benefit new home buyers and promote the increase of real estate sales and investment; Moreover, it can benefit the existing customers of housing loans, help to reduce the pressure on Residents' housing loan repayment during the epidemic, promote residents' consumption to a certain extent, and repair the traction and driving effect of consumption on the economic cycle.
According to the macroeconomic data in April, the total retail sales of social consumer goods decreased by 11.1% year-on-year, which was much higher than the market expectation. On the one hand, the sharp reduction of residents' consumption is related to the decline of residents' consumption willingness. In the face of uncertain factors such as frequent epidemics and employment difficulties, residents currently tend to strengthen savings, which can be verified by the central bank questionnaire in the first quarter and the super seasonal increase of residents' deposits in April; On the other hand, the epidemic has had a negative impact on Residents' income. In the first quarter, the national per capita disposable income increased by 6.3% year-on-year, far lower than the level of 13.7% in the same period last year. The new round of epidemic in March and April will undoubtedly have an impact on employment and residents' income. In April, the national urban survey unemployment rate rose to 6.1% (the previous value was 5.8%), the urban survey unemployment rate in 31 major cities rose to 6.7% (the previous value was 6.0%), and the unemployment rate in the population survey aged 16-24 exceeded 18%.
The central bank started the benchmark conversion of stock floating rate loan pricing on March 1, 2020. At present, more than 95% of individual housing loan interest rates are linked to 5-year LPR. The reduction of the five-year LPR interest rate can reduce the personal housing loan interest rate to 4.25% for the first house and 5.05% for the second house. Based on the repayment of 500000 loans and 30-year equal principal and interest, the reduction of LPR can reduce the monthly payment of residents' housing loans by 45 yuan. With the reduction of the lower limit of housing loan interest rate, the monthly housing loan expenditure of residents' families can be reduced by 100 yuan. Although the amount is small, it can provide continuous support for the implementation of normalized epidemic prevention policies.
Third, guide the decline of medium and long-term loan interest rates and stimulate the key role of investment. From the perspective of credit, the central bank's reduction of the five-year LPR interest rate also means stimulating the demand for medium and long-term loans and stabilizing investment. The credit decline in April was most obvious in medium and long-term loans, with the decline reaching the second lowest level in history. According to the loan investment data of financial institutions in the first quarter, the growth rate of medium and long-term loans in industries, services, real estate and other fields weakened at the same time. Among them, the growth rate of real estate mortgage loans (down 2.3 percentage points) and light industry loans (down 2 percentage points) fell more significantly.
Although the decline in medium and long-term loan demand of enterprises reflects the weak willingness of enterprises to invest, the fundamental reason is the downturn in enterprise profit expectation, for monetary policy, minimizing financing costs is still one of the few choices at present. In the first quarter, the monetary policy implementation report opened a special column, emphasizing that the central bank guided financial institutions to reduce the weighted average interest rate of new deposits by 10 bp a week by establishing a market-oriented adjustment mechanism for deposit interest rates. In our interpretation, we suggested that this opened space for reducing LPR interest rates. At 4? Under the guidance of "fully expanding China's demand and playing the key role of effective investment", the Politburo meeting called for guiding commercial banks to reduce the five-year LPR interest rate, which can serve the dual purpose of promoting investment and is conducive to the completion of the task of "strengthening macro policy regulation and stabilizing the economy".
Conclusion and Enlightenment
There have been two asymmetric interest rate cuts in LPR this year. The last one was in January, from which we can experience the changes in policy ideas:
First, different backgrounds convey the signal of "stabilizing currency + broadening credit" of the central bank. The LPR reduction in January this year was carried out under the background of the MLF interest rate reduction in the same period, so it can be regarded as a combination of "wide currency + wide credit"; The LPR reduction is based on the unchanged MLF interest rate this month, with the characteristics of "stable currency + wide credit". The first quarter monetary policy report of the central bank has made it clear that the next step of monetary policy will take stabilizing growth and ensuring employment as the first goal, and pay close attention to the changes of inflation situation. The intention of "stabilizing money + broadening credit" is obvious, which has been verified by the changes of MLF and LPR price signals this month.
Second, the range is different, reflecting that the property market policy has undergone a fundamental change. In January this year, the five-year LPR only lowered 5 BP on the basis of the 10 bp drop in MLF interest rate, indicating that the central bank's property market policy was cautious at that time. In contrast, the five-year LPR sharply reduced 15bp on the basis of the 20bp reduction in the lower limit of the first house loan and the 10bp reduction in the weighted average interest rate of new deposits guided by the market-oriented adjustment mechanism of deposit interest rate, creating the largest decline since the LPR reform in 2019, reflecting the fundamental change in the real estate market policy.
Third, due to different structures, it should not be interpreted as a signal of "full drainage". The structure of asymmetric "interest rate cut" in January is that the one-year LPR is reduced by 10bp + the five-year LPR is reduced by 5bp. This time, only the five-year LPR interest rate is reduced, and the one-year interest rate remains unchanged, indicating that the current situation of abundant short-term funds has attracted the attention of the central bank. In fact, the central bank has substantially recovered the base currency through the expiration of policy tools last month. The structure is dominated by short-term funds, reflecting the central bank's regulation idea of "short collection and long loan". Therefore, it is not appropriate to interpret this LPR reduction as a signal of "full water release".
For the market, the central bank's combined allocation of "stable currency + broad credit" is conducive to the improvement of the liquidity of the equity market and is good for real estate, new and old infrastructure, building materials and other sectors. But for the bond market, the impact is relatively complex.
On the one hand, at present, the core restricting the rebound of economic growth lies in the weak profit expectation of enterprises. The root restricting the rebound of sales volume in the real estate market lies in the expected decline of residents' income. The problem does not lie in the financing end. Therefore, the reduction of LPR does not directly stimulate the economy; On the other hand, the overweight of the "wide credit" policy will boost inflation. The short-term capital interest rate will continue to be lower than the policy interest rate or trigger speculation, which will be dealt with by monetary policy. On the whole, the short-term risk of the bond market is small, but we need to pay attention to the medium and long-term risk.
