Research conclusion
Event: on January 20, the central bank announced the latest loan market quotation interest rate (LPR): the one-year LPR was 3.7%, and the five-year LPR was 4.6%, down 10bp and 5bp respectively compared with the last quotation.
The downward driving force of LPR quotation comes from the central bank's reduction of MLF interest rate 10bp on January 17. In December, the data structure of social finance was poor, the growth rate of social finance hit the bottom and rebounded, mainly supported by government bonds and bills, the demand for physical financing was insufficient, and the medium and long-term loans of enterprises and residents were reduced compared with the same period last year. At the same time, under the background that it is difficult to boost consumption growth in the short term, investment is the most important starting point for steady growth, and broad money is a necessary condition for promoting investment improvement.
The 5-year LPR decreased for the first time after 20 months, and the variation range of the quotation was restrained as always. The decline range of the 5-year LPR was half of the variation range of MLF interest rate. Since the improvement of LPR mechanism in August 2019, all previous decreases in MLF interest rate have led to the decline of 1-year and 5-year LPR quotation. However, except November 2019 (MLF interest rate was reduced by 5bp in November 2019, because the minimum adjustment range of LPR quotation was 5bp, and the 5-year LPR also decreased by 5bp in the current month), the change range of 5-year LPR is half of that of MLF. This is no exception, It reflects that the bank maintains a certain term interest margin when quoting.
The 5-year LPR is the "anchor" of the interest rate of medium and long-term funds such as manufacturing medium and long-term loans, infrastructure supporting loans and personal housing loans. Its reduction is conducive to the stabilization and recovery of medium and long-term credit and is beneficial to all industries. Liu Guoqiang, vice governor of the central bank, said at a press conference on January 18, "LPR is a macro variable, and its changes are not specific to specific industries. That is to say, it also has an impact on all industries, not for someone, but a total and inclusive". However, relatively speaking, considering the strict regulation in the early stage, the marginal improvement of the confidence and financing environment of the real estate industry may be the most obvious due to the change of LPR in this five-year period, even if the range is only 5 basis points.
It is worth noting that on January 19, the people's Bank of China issued the announcement on the authorization of the national interbank lending center to issue quotation banks of quoted interest rates in the loan market and the adjustment of the release time. In order to strengthen the expectation management and promote better connection between the release time of LPR and the operation time of the financial market, the release time of LPR was adjusted from 9:30 a.m. on the 20th of each month (postponed in case of holidays) to 9:15 a.m, The adjustment will be implemented from January 20, 2022. This measure makes the announcement of LPR on January 20 and even in the future earlier than the opening trading time of the stock market and bond market, which is conducive to smoothing the impact of policy signals on asset prices.
The operation of monetary policy in the first quarter is still expected. On January 18, the Information Office of the State Council held a press conference. Liu Guoqiang, vice president of the people's Bank of China, introduced the financial statistics of 2021 and answered reporters' questions, When it comes to the deposit reserve ratio, there is still room: "whether compared with other developing economies or with the deposit reserve ratio in our history, it should be said that the level of the deposit reserve ratio is not high... But there is still some room for us to use according to the economic and financial operation and the needs of macro-control". Considering a series of factors such as the persistence of the demand for steady growth in the first half of the year, the need for a relatively loose liquidity environment for the issuance of special bonds, and the need for credit support for moderately advanced infrastructure construction, we think it is possible to reduce the reserve requirement in the first quarter.
Risk tips
The epidemic situation changes beyond expectations, affecting the recovery of project construction and consumption;
The Fed's monetary tightening rhythm exceeded expectations, affecting the trend of China's monetary policy.
