Haitong Securities Jiang Chao: Zero interest rate reduction cycle cannot be said lightly meaningless
Interest rate cuts do not equal the rate cut cycle-how to understand the current monetary policy!
(Haitong Macro Weekly Communication and Thinking No. 346, Jiang Chao, etc.) Jiang Chao, etc. Jiang Chao ‘s macro bond research summary has been short in the past, and the voice of gradual interest rate cuts has been endless, but looking at your loan bill, it feels more like someone elseRate reduction at home.
How to understand this round of interest rate cuts, has China really entered the so-called interest rate cut cycle?
I. Dazzling interest rate cuts This round of interest rate cuts began on August 17th, and gradually announced the launch of the reform of the loan market quoted interest rate (LPR) formation mechanism.
In the end, there were mainly three types of interest rate reductions.
The first type is the LPR interest rate.
On August 20, the one-year LPR was announced in advance as 4.
25% more than the Air Force’s 4.
31% down 6bp.
On September 20, the one-year LPR dropped by 5bp to 4.
On the recent November 20, the LPR was reduced by 5bp to 4 every 1 year.
15%, LPR over 5 years is also down 5bp to 4 for the first time.
The second category is the MLF interest rate.
On November 5th, the one-year MLF operation rate before the initialization was announced in advance of 3.
3% return 3.
25%, which is also the first reduction in MLF interest rates since February 2016.
The third type is the reverse repo rate.
On November 18, the 7-day reverse repurchase tender announced in the spring dropped 5bp to 2.
5%, this is also the first time since October 15 years of reverse repurchase tenders.
Second, the actual rate cut is minimal.
However, from the perspective of the market, the actual rate of interest rate cut is minimal, which is reflected in two aspects: First, the benchmark interest rate is only reduced by 5bp.
Of the above three interest rates, the MLF and reverse repurchase bid rates are determined by interest rates, and the benchmark interest rate can be considered.
The LPR interest rate is quoted by commercial banks on the basis of MLF. In fact, it is determined by commercial banks and is an indicator of market interest rates.
Since the establishment of the one-year MLF in early 2016, the trend has been basically the same as that of the simultaneous reverse repurchase bidding, and the adjustment range for each change is exactly the same.
In the end, both the MLF and reverse repurchase rates were only reduced by 5bp, which indicates that the benchmark interest rate was only reduced by 5bp in the current round.
Therefore, the three interest rate cuts since November are actually one thing.
First, the MLF interest rate was reduced by 5bp, and then the reverse repurchase bidding followed by a 5bp reduction, and then the LPR interest rate was reduced by 5bp following the MLF.
As a result, lending rates have barely fallen.
Initially disclosed in the third quarter cargo policy report, after the LPR reform was launched in August, the ratio of loans with interest rates higher than LPR in September was 83.
05%, compared with 84 in August.
13% slightly down.
However, the budget announced in advance that the average interest rate for general loans in September will increase to 5.
96%, an increase of 0 from June.
That is to say, even in September after the previous LPR reform was initiated, the bank’s actual lending rate fell.
In October, the LPR interest rate remained unchanged. In November, the LPR interest rate was reduced by 5bp following the benchmark interest rate. As a result, the latest general bank loan rates may have been replaced.
The level of 91%, which was about June, has only dropped by 3bp.
The interest rate for residents’ loans is mainly the mortgage rate, and the average mortgage rate at the end of June was 5.
53%, rose to 5 in September.
The latest mortgage interest rate linked to 5-year LPR was also reduced by 5bp in November, so the latest mortgage interest rate linked to about 5.
Suppose you took a 20-year principal and interest-based home loan for 20 years in June.
With a 53% mortgage interest rate, a monthly repayment of 6,986 yuan is required.
And follow the latest 5.
The 5% mortgage interest rate requires a monthly repayment of 6,879 yuan, saving about 17 yuan before, and the decline is very limited.
Third, monetary policy will not be tightened. Since the rate of interest rate reduction is so limited, why do you gradually lower it?
In our opinion, the main message passed this time by the gradual and modest rate cut is that monetary policy will not be tightened, thereby stabilizing income expectations and preventing upward interest rates from hurting the economy by mistake.
Inflation triggered austerity expectations.
After August this year, affected by the hog epidemic, the price of pigs suddenly accelerated to increase, and the chain growth rate for the third consecutive month was around 20%.
Due to the surge in pig prices, the CPI reached the policy target of 3% in September and further rose to 3 in October.
The rise in inflation expectations has triggered the gains from tightening monetary policy, which is reflected in the bond market. The 10-year government bond yield has gradually rebounded, rising from the lowest 3% in mid August to 3 at the end of September.
And historical experience shows that the national debt interest rate is a leading indicator of loan interest rates. If the national debt interest rate continues to rise, then the loan interest rate will often rise afterwards.
The economic downturn still needs to be loose.
However, the budget and the current economic downturn are still under pressure and still need the support of loose monetary policy.
The GDP growth rate in the third quarter fell by 6%, hitting a new low level for nearly 30 years, and was already lower than the quarterly lows during the Asian financial crisis in 1998 and the global financial crisis in 2008.
The industrial growth rate in October replaced 4.
7%, only higher than 4 in August.
4%, the second lowest value of the year. From the perspective of the three major needs, only the decline in exports in October improved slightly, and the rapid change in consumer investment growth means further downward pressure on the economy in the short term.
In this context, if the expected upward trend is allowed to push up the interest rate level, considering that the gradual upward trend is dominated by pig prices, the structural monetary tightening will indeed hurt the economy by mistake.
In fact, a slight signal of interest rate reduction has released a clear signal that monetary policy will not be tightened due to the surge in pig prices, which can stabilize market expectations and prevent a significant rise in interest rates.
After the policy rate was cut in November, the latest 10-year Treasury rate has fallen back to 3.
About 2%, which means that the expectations of rising interest rates have been effectively distorted, which also helps the economy to stabilize at a low level.
Fourth, we cannot lightly reduce the interest rate cut cycle, but in addition, we think that the short-term interest rate cut has limited space, and it is by no means entered into the interest rate cut cycle. The reason is: First of all, the real interest rate reduction is not 5bp.
Internationally, the rate of interest rate reduction is usually 25bp. For example, the US Federal Reserve has cut interest rates three times this year and reduced the interest rate by 75bp.
In China, the amplitude of the national budget benchmark after 2010 is also 25bp at regular intervals, while the smaller downward adjustments are 18bp and 27bp.
It can be seen that a 5bp interest rate cut is far lower than the international and historical averages, and its role is to prevent interest rates from rising rather than to guide interest rate growth to decline.
In practice, 淡水桑拿网 prevent potential divergence.
In the quarterly third quarter cargo administration report, it was clearly stated that future expenditure needs are wary of expected expected divergence.
Furthermore, we also discussed the price trend in a column, arguing that there is no basis for continued growth or deflation.
It is expected that after 2020, the structural mutations caused by the reduction of pig price growth will gradually fade away, and after the base effect has subsided, PPI will lead to bottoming out and the gap between CPI and PPI will narrow.
In this context, if monetary policy is significantly relaxed and the PPI is bottomed out, it may stimulate growth to spread from pig prices to other areas.
Therefore, to prevent the unexpected divergence, it is still necessary to maintain a sound monetary policy, which also means that there is limited room for interest rate cuts.
Again, avoid stimulating real estate.
In the Politburo meeting in July, it was clearly stated that “the substance should not be used as a means of short-term economic stimulus”, and at the same time, this reference was echoed in the third quarter monetary policy report.
According to the latest loan interest rate mechanism, the mortgage interest rate is linked to the 5-year LPR, which is jointly determined by the MLF interest rate and the bank plus points.
Assuming that the future really enters the interest rate reduction cycle, that is, the continuous reduction of the MLF bidding interest rate, it will cause the mortgage interest rate to continue to decrease, and the result will be real estate restimulation, in case the real estate bubble resurrects, it is definitely worth the money.
Finally, we must stick to structural deleveraging.
At the meeting of the Central Committee of Finance and Economics in early April 18, “structural deleveraging” was first proposed.
The 19-year government work report also made “adhering to structural deleveraging” an important goal.
And in the monetary policy report in the third quarter of the beginning of the year, it was also necessary to “orderly advance structural deleveraging.”
In the past two years, thanks to policies such as new asset management regulations, we have successfully stabilized China’s debt leverage.
Based on the revised 18-year GDP data, we estimate that the macro-leverage arrangement at the end of 18 years was 239%, which has been stable at this level for six consecutive quarters.
However, since entering 2019, the macro leverage has shown a slight upward trend. We estimate that the macro leverage at the end of the third quarter will rise to 245%.
The reason is that the current social financing budget surplus is growing at 10.
7%, still higher than 7.
9% GDP nominal growth rate.
If at this time we adopt a reasonable and substantive interest rate cut policy to stimulate monetary financing to continue to rise, then it may cause China’s macro leverage to change again.
Therefore, no matter from the perspective of preventing the divergence of expectations, nor from stimulating real estate and structural deleveraging, China does not support China’s future interest rate cut cycle.
Fifth, cherish normal monetary policy and even future growth in order to increase the intensity of countercyclical adjustments and continue to reduce interest rates. We believe that there are at most a few other 5bps. The overall interest rate cut is very limited.Negative interest rates are meaningless.
First of all, if the economy can be improved by a major interest rate cut, Japan and the euro area, which currently implement negative interest rates, should be the best economies.
Therefore, the truth is that long-term economic growth has nothing to do with currency, and developing the economy with money and debt will only lead to short-term bubbles and long-term depression.
Interest rates match economic growth.
From a macro perspective, the level of interest rates actually matches the level of economic growth.
The US Treasury bond rate is around 2%, higher than the negative interest rates in Japan and the Eurozone, because the US has a higher level of economic growth.
Usually, the nominal growth rate of a country ‘s GDP determines the upper limit of corporate loan interest rates. After deducting credit spreads, it is the level of national debt interest rates, and the gradual benchmark interest rate is similar to short-term national debt interest rates.
For example, the current nominal growth rate of the United States’ GDP is about 4-5 percent, and its bank’s best lending rate is 4.
75%, roughly the same as the nominal GDP growth rate.
Its 1-year Treasury bond rate is 1.
56%, the interest rate difference with the loan rate is 300bp.
The benchmark benchmark interest rate range is 1.
75%, close to the one-year Treasury rate.
And follow China currently 7.
The nominal growth rate of 9% of GDP, the average average interest rate of the latest bank loans is 5.
96%, the loan interest rate is still much lower than the nominal growth rate of GDP, indicating that in proportion to economic growth, the current loan interest rate is not particularly high.
The interest rate on China’s one-year government bonds is currently 2.
64%, the interest rate spread is about 300bp, similar to the United States.
The overall 7-day reverse repo bidding interest rate is currently maintained at 2.
About 5% is actually not high.
Financing is not expensive but difficult.
The main problem of the current Chinese economy is not expensive financing, and it is difficult to substitute financing.
According to preliminary published data, before 2013, private enterprises accounted for as much as 60% of the increase in loans, but after 2014 it fell to only 20%.
From the perspective of the bond market, private enterprises accounted for about 20% of the net financing of credit bonds in 15-17, and in 18 years the net financing of credit bonds of private enterprises was close to zero, until November 19300 billion.
Why is private enterprise financing difficult?
The key is that the financial system is dominated by state-owned enterprises, so credit is naturally expected to become an enterprise.
The key to breaking the situation is to further break through the monopoly of the financial industry.
Recently, the State Council announced that allowing foreign investors to set up holding or even wholly-owned banks, insurance, securities firms and funds in China is actually breaking the monopoly of the financial industry, prompting increased competition in the financial industry and improving the future financing status of private enterprises.
Therefore, in terms of monetary policy, what China currently needs is not absolute monetary policy. Rather, it should further intensify reform and opening up, and unblock alternative mechanisms for monetary policy.
In summary, we believe that in the face of structural inflation and downward economic pressure at the same time, the change of choice will slightly reduce the policy interest rate. The message is that monetary policy will not tighten and hurt the economy by mistake, but it also means that currencyThe policy will not be greatly relaxed, and there is no so-called rate cut cycle.
I. Economy: Demand is basically stable 1) Offline real estate is stable.
In the first 21 days of November, real estate sales growth in 4 first-tier cities rose 26%, and real estate sales growth in 11 second-tier cities fell 4%.
Real estate sales in 18 third- and fourth-tier cities increased by more than 8%.
4%, the growth rate of real estate sales has improved since November compared with October, but real estate sales in third and fourth tier cities are still stable.
2) The decline in cars narrowed.
In the first 17 days of November, the passenger car retail and wholesale growth rates of the CUP were -13% and -11%, respectively. Although the car sales in the previous two weeks were weak, they have improved significantly in the first week.
3) The growth rate of power generation is stable.
In the first 22 days of November, the coal consumption of the six major power plants increased by more than 15%.
6%, among which the growth rate of coal consumption for power generation has rebounded since mid-late, which means that the growth rate of power generation since November is still stable.
Second, prices: pig prices fell significantly 1) pig prices fell significantly.
Last week pork prices fell by 6 from the previous month.
9%, egg, poultry, and vegetable prices also fell, and food prices overall fell2.
2) CPI continues to rise.
Pig prices have fallen since November, but the overall proportion of pig prices in November has been increasing for 10 months.
By the end of November, the price of edible agricultural products of the Ministry of Commerce increased by 4 from the previous month.
3%, CPI food prices are expected to increase by 2 in November.
5%, the CPI rose to 4 in November.
3) PPI decline narrowed.
Since November, coal prices have fallen, steel prices have rebounded, and oil prices have risen slightly.
In the end, the price of raw materials for port futures in November will decrease by 0.
1%. It is predicted that the PPI in November will remain flat month-on-month, and the decline in PPI will narrow to 1.
4) Expected expected improvement.
Since November, pig prices have dropped significantly, which means that short-term improvements are expected. Although CPI will still rise significantly in November, the CPI will rise from December to fall.
In terms of PPI, the rise in steel and oil prices since November, coupled with the apparent drop in PPI at the end of last year, is about to disappear, and the PPI tends to bottom out and rise from negative to positive early next year.
Third, liquidity: the repurchase rate is reduced 1) the currency interest rate has fallen.
Currency interest rates fell last week, with the average R007 falling by 14bp to 2.
66%, mean R001 is down 34bp to 2.
DR007 downstream from 17bp to 2.
49%, DR001 down 33bp to 2.
2) The budget continues to be released.
Last week, there were no funds in the open market, and the transition operation invested 300 billion yuan in reverse repurchase. This foreign bank invested 50 billion yuan in cash, totaling 350 billion yuan.
3) The exchange rate depreciated slightly.
Last week, the US dollar index rebounded slightly, the RMB exchange rate against the US dollar and the US dollar declined slightly, and both the onshore and offshore yuan dropped to 7.
4) The repo rate is reduced.
Last week’s budget was cut by 7 days for reverse repurchase bids of 5bp to 2.
5%, which is consistent with the reduction in the short-term debt instrument operating interest rate, helps reduce the marginal cost of financial institutions, promotes the reduction of LPR quotations and the actual corporate interest rate, and is intended to deal with short-term economic pressure and strengthen countercyclical adjustments.
However, the interest rate is only reduced by 5bp, which no longer reduces the interest rate sufficiently, reflecting the fine-tuning and precise thinking.
The fiscal policy reports of various countries have proposed to prevent the spread of expected expectations. Considering the continued high in the next half year, there is limited space for gradually increasing and reducing interest rates, and monetary policy will remain stable as a whole.
4. Policy: Do not engage in flood irrigation 1) Do not engage in flood irrigation.
When meeting with reporters, Premier Li Keqiang and principals of major international economic and financial institutions stated that China is confident of achieving the economic and social development goals set at the initial stage and keeping economic operations in a reasonable range.
It will continue to maintain the continuity and stability of macroeconomic policies and make good use of counter-cyclical adjustment tools.
No matter how the outside changes, China will unswervingly implement a higher level of opening up.
We will implement precise policies, grasp the policies and regulations on tax and fee reduction, and insist on refraining from “irrigated floods”.
2) Improve the socialist economy.
Article by the Vice Premier of the State Council Liu He Renmin Ribao: Adhere to and improve the basic socialist economic system, adhere to and improve the public ownership as the main body, and jointly develop the economy of various forms of ownership to stimulate the vitality of various market entities;Market system.
3) Coping with population aging.
The State Council issued the “National Medium- and Long-Term Plan for Actively Coping with Population Aging”, deploying specific tasks for population aging in five aspects, including consolidating social wealth reserves, improving effective supply of measures, building a system for supplying old services and products, and strengthening scientific and technological innovation capabilities.
The “Planning” proposes to select regions with characteristics and expectations for comprehensive innovation pilots in response to population aging.
V. Overseas: The Fed announced the minutes of its October meeting, and the Eurozone ‘s PMI rose in November 1) The Fed announced the minutes of its October meeting.
Last Wednesday, the Fed announced the minutes of the October FOMC meeting. Most members believe that after the interest rate cut in October, there is no need to further cut interest rates in the short term. Unless there is a major change in the economy, the current interest rate is appropriate. All members do not agree to implement negative interest rates.An effective tool to boost the US economy, most members also discussed standing repurchase facilities.
2) The Federal Reserve has no plan to issue digital currencies.
Last Wednesday, Fed Chairman Powell continued that the Fed did not issue a Central Bank Digital Currency (CBDC) plan and necessary, but could only use “small-scale research-based technology experiments” to better understand the technologies that can be used to support CBDC, while paying close attentionAdvances in global digital currencies.
3) The Eurozone ‘s manufacturing PMI picked up in November.
On Friday, the euro zone announced an initial manufacturing PMI of 46 in November.
6, compared with the previous value of 45.
9 rebounded, Germany, France and manufacturing PMI in November were 43.
6, also higher than the previous value.
On the same day, European Central Bank President Lagarde said that the euro area needs to be weak and weak, and the monetary policy evaluation will begin in the near future.
4) Japan’s export decline has expanded.
On Wednesday, Japan announced that it exported -9 twice in October.
2%, previous value -5.
2%, the previous decline was the largest in 3 years.
Among them, exports to the United States are reduced by 11 every year.
4%, exports to Asia decreased by 11 in ten years.
2%, the decline in emissions of US autos, aircraft engines and the substitution of plastics in China is the main drag.