Does The Interest Rate Hike In The Money Market Mean That Monetary Policy Begins To Tighten?

The central bank raised the operating interest rate of 7-day, 14 day and 28 day reverse repo by 10 basis points, of which the bid winning rate of RMB 20 billion for 7-day reverse repo increased from 2.35% to 2.45%, the bid winning rate of RMB 20 billion for 14 day reverse repo increased from 2.5% to 2.6%, and the bid winning rate of RMB 40 billion for 28 day reverse repo increased from 2.65% to 2.75%. At the same time, the Central Bank operated medium-term lending facilities (MLF) for 17 financial institutions for 303 billion yuan, raised the MLF operating interest rate by 10 basis points, and the six-month and one-year interest rates rose to 3.05% and 3.20% respectively. The central bank's measures have also attracted market attention and heated discussion. money market increase interest Does it mean that monetary policy begins to tighten? What is the impact on the capital market?

This increase in bid winning interest rate only belongs to the increase of interest rate in the money market, which is different from the increase of deposit and loan interest rate (that is, the increase of interest rate as we usually call it). The central bank's raising of interest rates on deposits and loans is often an active regulation behavior, which belongs to the scope of macro regulation. The money market won the bid interest rate The upward adjustment of is often more market-oriented. In fact, the increase of bid winning interest rate is not news. For example, since 1996, the central bank has operated in the open market every time, and the bid winning interest rate has often changed.

On the other hand, the time when the central bank raised the bid winning interest rate is also quite "subtle". The Federal Reserve announced in the early morning of the 16th Beijing time that it would raise the target range of the overnight interest rate by 25 basis points to the range of 0.75-1.00%. This is the third interest rate increase by the Federal Reserve since the financial crisis and the second in three months. This year, the Federal Reserve will raise interest rates several times or no longer, which is still unknown. While the central bank raised the bid winning interest rate, there are also factors behind the Fed's interest rate hike. If the Federal Reserve did not raise interest rates, the bid winning interest rate might not rise even in the context of "marketization".

In response to the central bank's interest rate hike in the money market, a financial website launched“ Central Bank Increase MLF and reverse repo rate ". Among them, 65.5% of the respondents think it is a signal of tightening monetary policy, 57.5% of the respondents think the central bank will raise interest rates this year (increase deposit and loan interest rates), while 47.8% of the investors think it is bad for A-shares, and 24.9% and 27.3% of the investors think it is bad for A-shares, respectively. Behind the data, in fact, there are some concerns of investors.

After all, in 2015-2016, the low interest rate in the money market led to high leverage in the capital market, and the increase in interest rate in the money market helped to deleverage. For example, leveraged buyouts and leveraged shareholding increases in the capital market aggravate the volatility of relevant individual stock prices, while objectively amplifying the risks of the entire market. In the case of deleveraging, it will be conducive to the smooth operation of the market, protect the interests of small and medium-sized investors, and prevent the stock market "barbarians" and capital crocodile investors from stealing huge profits from the market.

Although the survey results show that the move of the central bank to raise interest rates in the money market is bad for A-shares, it may not be so in fact. For example, after the news was released on Thursday, the Shanghai and Shenzhen stock markets both opened high and went high. The Shanghai Stock Exchange Index even hit a new high this year, without seeing the "shadow" of bad news. Therefore, the impact of interest rate hikes in the money market on the capital market is at least neutral. At present, the stock market is moving in accordance with its operating law. Whether the United States raises interest rates or the central bank raises bid winning interest rates, the stock market shows the characteristic of "turning a blind eye", which is the best proof.

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