Source: Huaxia Times
Author: Li Minghui
Abstract: From the widely circulated essay a month ago to the simultaneous voice of the Ministry of Finance and the People's Bank of China recently, the market's discussion on "the next purchase of national debt by the central bank" has never been higher, and the possibility of the central bank resuming the purchase of national debt seems to be increasingly prominent.
From the widely circulated essay a month ago to the simultaneous voice of the Ministry of Finance and the People's Bank of China recently, the market's discussion on "the next time the central bank buys national debt" has never been higher, and the possibility of the central bank resuming the purchase of national debt seems to be increasingly prominent.
On April 23, the Ministry of Finance and the People's Bank of China coincidentally responded to the central bank's purchase and sale of government bonds in the open market. In an interview with the media, the relevant person in charge of the central bank said that the central bank's trading of government bonds in the secondary market can be used as a liquidity management method and a reserve of monetary policy tools. On the morning of the same day, the Ministry of Finance also issued a document stating that it "supports the gradual increase of treasury bond trading in the open market operation of the Central Bank".
In this regard, Yang Delong, chief economist of Qianhai Kaiyuan Fund, said in an interview with the Huaxia Times that if the central bank directly buys and sells government bonds in the secondary market, then the central bank can not only add a liquidity management tool, but also more easily release funds, which will play a good role in playing the role of the central bank.
The central bank will buy bonds next? Two departments make a sound
At the end of March this year, the news about "the central bank's next purchase of treasury bonds" and "the Chinese version of QE (quantitative easing) will be launched" was widely spread in the market. On April 23, the heavy voice of the Ministry of Finance and the Central Bank pushed the market's attention and discussion on this news to a climax.
On the morning of April 23, the theoretical learning center group of the Party Leadership Group of the Ministry of Finance published an article in the People's Daily, "Insisting on Deepening the Structural Reform of the Financial Supply Side - Learning" Xi Jinping's Excerpt on Financial Work ". The article mentioned that it is necessary to strengthen the coordination 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.
On the same day, the Financial Times, the central bank's competent media, released heavy news late at night. In an interview with the Financial Times, the head of the central bank's relevant department said that the central bank's purchase and sale of government bonds in the secondary market can be used as a liquidity management method and a reserve of monetary policy tools. "The central financial work conference proposed that 'we should enrich the monetary policy toolbox and gradually increase the purchase and sale of government bonds in the central bank's open market operation'. China's government bond market has ranked the third in the world, and its liquidity has significantly improved, which makes it possible for the central bank to carry out cash bond purchase and sale operations in the secondary market."
In fact, from a global perspective, it is common for central banks to buy and sell government bonds in open market operations. The Federal Reserve, the European Central Bank, the Bank of Japan, etc. have all conducted relevant operations. This is a relatively common monetary policy tool in itself.
According to the official website of the People's Bank of China, bond transactions in the open market business of the People's Bank of China mainly include repurchase transactions, spot bond transactions and the issuance of central bank bills, including spot bond transactions. Historically, China's central bank tried to buy and sell treasury bonds in 1997, but was limited by the lack of market depth and breadth, and soon stopped. According to the current Law of the People's Bank of China, the central bank prohibits the purchase of government bonds in the primary market, but in order to implement monetary policy, it can buy and sell government bonds, other government bonds, financial bonds and foreign exchange in the open market.
Will it cause "big water discharge"?
It is worth mentioning that for the "central bank's next purchase of government bonds", some insiders interpreted it as "the opening of China's QE (quantitative easing) policy". However, in the view of the above-mentioned heads of relevant departments of the central bank, the two are not the same.
"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, while China insists on implementing normal monetary policies. The People's Bank of China's buying and selling government bonds is quite different from the quantitative easing (QE) operations of these central banks." The head of the relevant central bank department said.
In addition, the person in charge also said that the issuing scale of national debt should be relatively large and the issuing rhythm should be relatively stable in order to effectively implement policy transmission and avoid sharp fluctuations in market interest rates; Moreover, in the future, the central bank's treasury bond operation will also be two-way.
"The purchase of government bonds by the central bank can also be seen as the coordination of fiscal policy." Yuan Shuai, executive director of the high-quality development promotion project for specialized new enterprises, told the Huaxia Times that when the finance needs to expand spending or reduce taxes, the purchase of government bonds by the central bank can provide financial support for the government and help the smooth implementation of fiscal policy.
Since this year, China's bond market has continued to strengthen, and the yield of long-term treasury bonds has fluctuated downward, with the yield of 30-year treasury bonds falling below 2.5%. In this regard, the head of the above-mentioned central bank departments said that 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. In his view, the long-term treasury bond yield will always run within a reasonable range that matches the long-term economic growth expectations.
From the perspective of bond supply, in the first quarter of this year, the pace of government bond issuance was slow, and the supply decreased significantly. Compared with the same period last year, the issuance of government bonds in the first quarter was nearly 240 billion yuan less, and the net financing amount was about 470 billion yuan less. Among them, the issuance scale of new special bonds only completed 16.3% of the annual issuance target, and the issuance progress was slow. At present, the market expects that the second quarter may usher in an intensive period of government bond issuance, especially the issuance of ultra long term special bonds may be launched. The weak supply of government bonds is expected to be significantly eased, and the readjustment of the supply and demand relationship will be conducive to the return of long-term interest rate limited bonds to fundamentals.
Song Xuetao, the chief macro researcher of Tianfeng Securities, said that the current liquidity premium in the bond market has dropped to the 30% percentile, and the liquidity environment is in a "relatively loose" range. The market's expectation of future liquidity rose to the 31% quantile, and from a historical perspective, it was more positive for loose pricing. The term price difference drops to the 14% quantile, and the price performance ratio of the long end is relatively limited compared with the short end; The credit premium dropped to the 6% quantile, and the cost performance of the credit sinking strategy was very limited. In addition, the trading congestion of bonds further decreased to neutral, and the short-term trading congestion of interest rate bonds decreased to 54% quantile, and the profit and loss ratio was low in the trading dimension. The short-term trading congestion of credit bonds rose to 47%, which has returned to neutral.
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