Just now, the central bank "cut interest rates"!

On November 18th, the People's Bank of China publicly announced a 12 basis point reduction in the 1-month fixed deposit rate for Chinese treasury cash, which had a certain guiding effect on the market. Reduction in the Fixed Deposit Rate for Chinese Treasury Cash On November 18th, the Ministry of Finance and the People's Bank of China conducted a 1-month fixed deposit operation for Chinese treasury cash amounting to 120 billion yuan, with a bid rate of 2.16%. According to Wind data, the rate for this 1-month fixed deposit operation was 12 basis points lower than the previous rate of 2.28%. Looking at the overall trend for this year, in the first half of the year, there was a significant reduction in the fixed deposit rate for Chinese treasury cash in January, followed by a relatively stable or even slightly increasing trend. Since August, there has been another significant reduction in the fixed deposit rate for Chinese treasury cash. The rate has been further reduced in November, which has had a certain impact on the market interest rate environment. Chinese treasury cash operations refer to the Ministry of Finance's demand deposits at the central bank. Treasury cash management refers to a series of government financial activities related to predicting, controlling, and managing treasury cash when the Ministry of Finance conducts public financial management on behalf of the government. What will the People's Bank of China do in the future? Last Friday, the People's Bank of China conducted nearly a trillion yuan of reverse repurchase operations to help stabilize sentiment in the open market; the main repo rates in the interbank market fluctuated slightly, with overnight weighted average interbank deposit rate remaining below 1.5%. In terms of long-term funds, the latest trading price for one-year interbank certificates of deposit among state-owned and major joint-stock banks is around 1.87%, close to the previous day's level. Traders stated that compared to the ample supply in the non-banking sector, banks' liquidity conditions can be considered average. Last Friday was the deadline for tax filing this month, and the factor of tax payments also made sentiment slightly cautious. Based on past experience, the People's Bank of China will renew the Medium-Term Lending Facility (MLF) that matures this month on the 25th. Faced with the disturbance of tax payments, traders said that next week they will continue to watch the support from the People's Bank of China in the open market, as well as the upcoming wave of local government bond supply and when it might trigger a required reserve ratio cut. Zheshang analyst Wang Menghan's analysis believes that, considering the inherent connection mechanism between government bonds and the funding environment, the liquidity and recapitalization during the past three years and the special refinancing bond period in 2023, during the subsequent issuance of government bonds, in terms of the funding environment, the central reserve ratio may still remain relatively stable but the tiering may be difficult to alleviate. As for certificates of deposit, prices will follow the tiered market trends. When a large number of government bonds are issued, yields may fluctuate higher to around 1.95%, with the possibility of some easing under the backdrop of a required reserve ratio cut in December. This article is a reprint from "Wind", edited by GMTEight: Jiang Yuanhua.