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3 lpr quotation is officially released!
On the morning of March 20, the People's Bank of China authorized the National Interbank Funding Center to announce that the loan market quoted interest rate (lpr) on March 20, 2024 is: 1-year lpr is 3.45%, and 5-year or above lpr is 3.95%. The above LPR is valid until the next LPR is released.
Including this round of quotations, there have been three rounds of lpr quotations this year. Among them, the LPR in January 2024 "stands still", the 1-year LPR is 3.45%, and the 5-year or above LPR is 4.2%, both of which are the same as the previous period. In the February LPR quotation, the 1-year LPR was unchanged at 3.45%, and the 5-year and above LPR was 3.95%, a decrease of 25bp. This is also the largest reduction in the 5-year LPR.
That is to say, after the unexpected reduction last month, LPR chose to "stand still" in March, which was in line with the consensus expectations of the market. Wang Qing, chief analyst of Oriental Jincheng Research Department, previously said that the current focus is to further improve the transmission efficiency of monetary policy and promote banks' credit extension to the real economy to "increase the volume and reduce the price." It is expected that the LPR quotations of the two maturity varieties in March will be will remain unchanged.
At the same time, the mlf announced last week has not been lowered. On March 15, in order to maintain reasonable and sufficient liquidity in the banking system, the People's Bank of China launched a 13 billion yuan 7-day reverse repurchase operation and a 387 billion yuan medium-term lending facility operation. The 7-day reverse repurchase and MLF operating interest rates are 1.8% and 2.5% respectively, both remaining consistent with the previous values. This mlf operation ended the central bank’s volume-increasing continuation mode that began in December 2022.
Wen Bin, chief economist of China Minsheng Bank, also said that in the environment where the MLF interest rate continued to remain unchanged in March, the cost of market-type active liabilities has increased slightly recently, and the competition in deposit pricing is fierce, commercial banks will continue to lower the points and space for LPR. Restricted, LPR in March is likely to remain unchanged from the previous period and remain stable in the short term.
Wang Yifeng, chief financial industry analyst at Everbright Securities, believes that since the beginning of March, the central bank’s OMO investment has returned to the tens of billions model, and short-term funding rates have risen slightly. From a total perspective, the central bank has no intention of excessive injection of liquidity. In the case of stable and abundant liquidity, taking into account the considerations of "stabilizing the exchange rate" and "preventing idling," the central bank's aggregate policy may remain unchanged in the short term and is in a "vacuum period." Therefore, the probability of "turning from loose to neutral" in terms of funding at the end of the first quarter increases.
In addition, central bank data showed that the weighted average interest rate of new corporate loans in February was 3.76%, down 1bp from January. In terms of personal loans, the interest rate of newly issued personal housing loans in February was 3.86%, down 8bp from January.
Wang Yifeng said that since the beginning of this year, loan pricing has been generally consistent with that of the fourth quarter of 2023, and loans have remained at historically low levels. In February, the 5-year LPR was significantly reduced by 25bp, further squeezing the interest rates of medium and long-term loans, driving the spread of medium- and long-term debt and loan financing to converge, and some companies may switch debt and loan financing channels. Against the background of falling interest rates, the spread between deposits and loans has narrowed. It cannot be ruled out that some ultra-low loan pricing and corporate deposit interest rates are inverted, resulting in funds being idle in the financial system.
Li Chao’s team at Zheshang Macro said it is expected that the second quarter will still be a window for total quantitative easing. Looking into the future of monetary policy, in the short term, it is expected that due to the constraints of exchange rates and balance of payments pressures, the probability of a comprehensive interest rate cut, that is, a reduction in reverse repurchase and MLF interest rates, is not high. However, in the second quarter, from the perspective of lowering real interest rates, the policy may still tend to guide the LPR downward, so there is still a possibility of interest rate cuts or RRR cuts. The second quarter is still a total quantitative easing window. Whether to choose to cut interest rates mainly focuses on the exchange rate and international balance of payments. If there is still pressure for exchange rate depreciation, the probability of an interest rate cut is small, or the RRR cut may still be adopted. The forward-looking indicator for judging interest rate cuts is dr007. If it continues to be significantly lower than the 7-day reverse repurchase rate, there is a probability of interest rate cuts.
Editor: Joey
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