Voice of the Central Bank: Buying and selling government bonds is totally different from quantitative easing operation

Every reporter Xiao Shiqing

Since the Central Bank's Monetary Policy Committee first proposed at its regular meeting in the first quarter of this year that "in the process of economic recovery, we should also pay attention to the change of long-term yield", the long-term treasury bond yield has continued to decline in recent years, which has caused widespread concern and hot debate in the market.

Regarding how to view the trend of long-term treasury bond yield, the relevant person in charge of the Central Bank recently said: "The long-term treasury bond yield mainly reflects the expectations of long-term economic growth and inflation, but it will also be disturbed by other factors such as supply and demand."

　　 Visual China

The person in charge said that at present, the fundamentals of China's long-term economic growth have not changed. China's economy has a good foundation, strong resilience, excellent momentum, great potential and sufficient vitality. The central bank is optimistic about the prospects of economic growth in the long run. However, factors such as supply and demand will also bring short-term disturbance to the yield of long-term treasury bonds. In some developed economies, at the stage of better economic growth expectations, the yield of national debt deviated from long-term economic growth expectations due to the periodic imbalance between market supply and demand.

　　 The central bank pays attention to the yield of long-term treasury bonds

The reporter noted that in recent years, the yield of long-term government bonds has continued to decline, with the yield of 30-year government bonds falling below 2.5%.

The relevant responsible person of the Central Bank believes that the long-term treasury bond yield will always run within a reasonable range matching the long-term economic growth expectations. China's real economic growth will remain at a reasonable level for a long time to come, and the trend of recovery and improvement in the past year is constantly consolidating. Some institutional investors also believe that future inflation is expected to recover from a low level. As a nominal interest rate, the yield of long-term government bonds will increase as inflation rises. These two aspects will support the long-term bond yield.

"It should be noted that the development of China's bond market has made considerable progress, ranking the second in the world in terms of total volume, but the market depth and price formation mechanism still have a process of continuous improvement and improvement, the market operation is more complex, and the long-term treasury bond yield and long-term economic growth expectations will be phased deviation." The person in charge said.

The person in charge pointed out that in theory, long-term bonds with fixed interest rates have a long duration and are sensitive to interest rate fluctuations. Investors need to attach great importance to interest rate risk. For transactional investors, by increasing leverage and prolonging the duration, they can gain more revenue from the sharp rise of short-term prices, but they are also prone to exacerbate market volatility and need to bear the losses arising from the sharp decline of prices.

For allocation investors such as banks and insurance, if they lock a large amount of funds in long-term bond assets with low yield, they will face a passive situation that the cost of liabilities will rise significantly, and the income will not offset the expenditure. Last year, the Silicon Valley Bank used a large amount of deposits and short-term borrowings to purchase long-term U.S. Treasury bonds and mortgage-backed securities (MBS). Short term debt was invested for a long time and the maturity was mismatched. Later, with the Federal Reserve raising interest rates and rising interest rates, the price of bond assets fell sharply, leading to the bank's insolvency and liquidity crisis.

　　 citic securities The research paper pointed out earlier that the central bank is concerned about changes in long-term interest rates, or aimed at improving capital efficiency and preventing liquidity traps. According to the research paper, the central bank may pay more attention to whether corporate loans will not flow to production after the loan interest rate drops to a historical low, but return to the banking system for arbitrage, thus causing capital idling at the financial system level.

　　 Trading treasury bonds is different from QE operation

The Central Financial Working Conference held last year proposed to enrich the monetary policy toolbox. At present, the scale of China's national debt market has ranked the top in the world, and its liquidity has significantly improved, which makes it possible for the central bank to carry out cash bond trading operations in the secondary market.

Many experts put forward that the open market operation of the central bank can cooperate with the finance for deficit financing, but the issuance scale of national debt should be relatively large, and the issuance rhythm should be relatively stable, so as to effectively realize policy transmission and avoid sharp fluctuations in market interest rates; In the future, the central bank's treasury bond operation will also be two-way.

The relevant person in charge of the central bank said: "The central bank conducts treasury bond trading in the secondary market, which can be used as a liquidity management method and monetary policy tool reserve. Some central banks in developed economies have been forced to buy government bonds unilaterally on a large scale to achieve monetary policy goals when conventional monetary policy tools have been exhausted. However, China insists on implementing normal monetary policies. The People's Bank of China's buying and selling government bonds is totally different from the quantitative easing (QE) operations of these central banks. "

On April 23, the Ministry of Finance wrote in the People's Daily: "In terms of the meso mechanism, we should strengthen the coordination and cooperation between fiscal and monetary policies and financial reform, improve the regulation mechanism of basic money supply and money supply, support the gradual increase of treasury bond trading in the open market operation of the central bank, and enrich the monetary policy toolbox."

In this regard, Lian Ping, chairman of the China Chief Economist Forum, said that this clarified two issues. First, the central bank can play the role of basic money supply and monetary policy regulation mechanism by trading government bonds in the secondary market, without legal barriers; Second, the central bank entered the market to buy a large number of government bonds and play the so-called QE function, which is not the original intention and goal of macro policy.

With the increase of the demand for issuing national debt, banks, as the main buyers of bonds, need to cope with the growing demand for various loans, and their ability to purchase bonds is gradually restricted; The reserve ratio has been continuously lowered to a low level, and there is room for reduction in the future, but there is little room for reduction; As a competent subject with unique functions, the central bank should appropriately increase the purchase of government bonds, which is an important manifestation of monetary policy supporting fiscal policy and is conducive to the development and stability of the government bond market.

It is worth mentioning that the central bank has made relevant statements to stabilize market confidence. On April 24, the yields of treasury bonds with various maturities rose to varying degrees.