Quantitative policy instruments continue to exert force, and the resumption of government bond trading in October may not affect the expected reserve requirement ratio cut in the fourth quarter.

On November 4, the People's Bank of China announced that in order to maintain ample liquidity in the banking system, on November 5, the People's Bank of China will conduct 700 billion yuan of reverse repurchase operations with a fixed quantity, rate tender, and multiple price bid for a term of 3 months. Wang Qing, chief macro analyst at Orient Securities, stated that the main reasons behind this move are: firstly, in October, 500 billion yuan was allocated for local government debt constraints, meant to resolve existing debts and expand effective investment, indicating that an additional 500 billion yuan in local government bonds may be issued by the end of the year, possibly resulting in a higher issuance of government bonds in November. Secondly, after the completion of the 500 billion yuan issuance of new types of policy financial tools in October, it will lead to a rapid growth of accompanying loans. Thirdly, there will be a significant increase in the amount of interbank certificates of deposit maturing in November. All of these factors are expected to bring about a certain degree of tightening in the liquidity of funds. Therefore, in response to potential tightening of liquidity, the central bank is injecting medium-term liquidity into the banking system through reverse repurchase operations, which will help maintain the funds in a relatively stable and ample state. This will support government bond issuance and guide financial institutions to increase monetary and credit distribution, while also signaling continued support for monetary policy. Wang Qing analyzed that compared to the suspension of government bond trading earlier this year, the yield on 10-year government bonds has risen to around 1.8%, with a widened term spread, indicating that the bond market is running smoothly and is now ready to resume government bond trading. In addition, the resumption of government bond trading and increased support for long-term liquidity in the banking system will further signal stability in economic growth, which will help stabilize the macroeconomic operation in the fourth quarter of this year and the first quarter of next year. The resumption of government bond trading in October will not affect the expectation of reserve ratio cuts in the fourth quarter. The central bank will comprehensively utilize various types of price and quantity policy tools to enhance efforts in stabilizing growth, and there is sufficient operational space for monetary policy.