Capital fabrics continue to be balanced and loose.

As the liquidity interference factors such as tax payment disappeared, the market funds returned to loose, and the central bank took advantage of the net withdrawal of funds in the open market. On Monday (August 1st), the central bank launched a 120-billion-day reverse repurchase in the open market. Considering that 150 million yuan of reverse repurchase expired on the same day, a net return of 30 billion yuan was achieved on a single day, ending 7 The pattern of continuous net delivery since mid-March. Market participants pointed out that after the central bank continued the MLF sequel and increased the operation of the open market, the funds were smooth across the month and returned to easing. In the short-term, domestic liquidity disturbances are not large, and the central bank's gradual return to liquidity is basically in line with market expectations. On the whole, the central bank’s intention to maintain its stability is not changed. It is expected that the follow-up funds will continue to be in a balanced and loose situation.

Funds continue to be loose

The central bank website announced yesterday that on Monday (August 1), a 120-billion-day reverse repurchase operation was carried out by interest rate bidding. The winning bid rate was still 2.25%, considering that there was a reverse repurchase of 150 billion yuan on the same day. Upon expiration, the open market achieved a net return of 30 billion yuan in a single day, ending the pattern of continuous net investment since mid-July.

Insiders pointed out that with the taxation, foreign exchange fluctuations, the end of the month and other disturbance factors gradually eliminated, the funds face back to loose, this week's domestic liquidity disturbance is not large, it is expected that the central bank will gradually return to liquidity.

In the inter-bank pledged repo market yesterday, the majority of the major repo rates fell overall. The overnight weighted interest rate was steady at 2.04%, and the 7-day and 14-day weighted interest rates were down 6.81BP and 5.61BP, respectively. The latest reports were 2.4188% and 2.68 respectively. %, 21-day weighted interest rate also fell 4.42BP to 2.7588%, and the longer-term 1-month weighted interest rate rose 6.7BP to 2.7948%.

The RRR cut is expected to cool down

It is worth noting that since mid-July, due to factors such as tax payment, the funds have once tightened marginally, and once again ignited the market's expectation of further easing of the currency, but with the return of funds to the loosening situation, coupled with the regulatory layer to leverage The intention to squeeze the bubble is still obvious, and the current RRR cut is expected to cool down.

"In July, due to the impact of tax payment, short-term funds have shown signs of tightening, and the RRR cut is expected to heat up again. However, the funds due in August can be fully hedged by the central bank's reverse repurchase, MLF, PSL and other instruments, and no tax is paid in August. The impact of the new financing on the base currency can also be provided by various innovative tools. At the moment when the Politburo meeting explicitly requires control of the asset bubble, the probability of RRR reduction is still not high.” CIC Securities said.

However, there are also views that it is still necessary to lower the rate cuts for the sake of steady growth. For example, Guoxin Securities 002736, Hong Kong economist Yu Jingjing said that the decline in China's manufacturing PMI in July indicates an increase in monetary and fiscal stimulus, which may have a certain negative impact on the renminbi. She expects to cut the RRR this quarter. Zhou Hao, an economist at the German Commercial Bank in Singapore, also commented that China’s official PMI was weaker than expected in July and fell below the glory line, indicating that manufacturing activity was affected by the recent floods. The central bank is expected to maintain economic growth. It will cut interest rates by 25 basis points in the third quarter, and in the coming months, several RRR cuts are also expected.