On September 23, Caixin reported (Reporter Liang Kezhi) that the central bank conducted a 74.5 billion yuan 14-day reverse repurchase operation today, with a bid rate of 1.85%, down from 1.95% before; conducted a 160.1 billion yuan 7-day reverse repurchase operation, with a bid rate of 1.70%, the same as before. Due to the expiration of 138.7 billion yuan 7-day reverse repurchase today, a net injection of 95.9 billion yuan was realized.

Chief Economist of citic sec Ming Ming told Caixin that considering the 10 bp rate cut of the 7-day reverse repurchase benchmark in July, the 14-day rate adjustment this time also followed suit, maintaining a stable interest rate differential with the 7-day period.

The Chief fixed income of a brokerage in Shenzhen also stated that today's central bank operation is a 'complementary reduction' to the previous 7-day reverse repurchase rate cut, with minimal impact on the market, and at present, various products are performing steadily.

Interbank pledged repo rates fell in early trading, with the 7-day rate dropping by more than 10 basis points. As of 11 am, the weighted average rate for DR001 was 1.9293%, and DR007 was 1.8737%.

On July 22, the central bank announced that starting from that day, the open market 7-day reverse repurchase operations would adopt fixed rates and quantity bidding, with the operation rate adjusted from 1.8% to 1.7%, marking the first cut since August 2023.

Another large brokerage analyst told Caixin that in addition to the supplementary rate cut, the 14-day reverse repurchase rate cut this time also considered the fund needs for the end of the quarter and the National Day holiday. As a partial rate cut, there has been no apparent impact on the market and interbank borrowing costs so far.

Choice data shows that on September 23, treasury futures opened, with the 30-year main contract up by 0.24%, the 10-year main contract up by 0.08%, the 5-year main contract up by 0.03%, and the 2-year main contract up by 0.01%.

The position of the 7-day reverse repurchase policy rate has been strengthened.

On September 23, following the People's Bank of China's cut in the 7-day reverse repurchase rate two months ago, the 14-day reverse repurchase rate was also lowered in sync.

Analyst Chen Li of Soochow Securities believes that behind the dual rate cuts in July, one can see the People's Bank of China's "composition" of the new round of monetary policy framework: the policy attributes of the 7-day reverse repurchase rate are strengthened, and the reference role of MLF to LPR rates has somewhat declined.

Li Chao believes that on June 19, Governor Pan Gongsheng proposed at the Lujiazui Forum that in the future, they could consider clearly defining a short-term operating rate of the People's Bank of China as the main policy rate. Currently, the 7-day reverse repurchase operating rate has basically assumed this function. Other term currency policy tools' rates can dilute the color of the policy rate and gradually clarify the transmission relationship from short to long term, therefore, the 7-day reverse repurchase rate will be the core policy rate in the future.

Observing that LPR closely follows the synchronous decline in reverse repurchase rates, Chen Li believes that the reference role of MLF rates to LPR rates is relatively weakened, and the gradual clarification of the transmission relationship from short to long term rates is underway.

Banking analysts mentioned above believe that the reason for adjusting the 14-day reverse repurchase rate two months after the adjustment of the 7-day reverse repurchase rate on July 22 should be due to the People's Bank of China's comprehensive consideration of market rates and policy objectives, among other tools' operational timing.

Another banking institutions trader believes that the 14-day reverse repurchase is an unconventional operating term, hence the operational timing is limited.

Does it affect the cost of bank liabilities?

Zheshang Securities chief economist Li Chao believes that one of the core purposes of the central bank's reduction in the 7-day reverse repurchase rate is to reduce the financing costs of the real economy and strengthen the support of the financial sector for the economy.

Will the indirect impact of the reduction in the 14-day reverse repurchase rate affect bank liabilities and financing costs? In response, Citic Securities firmly believes that the short-term financing impact is not significant.

This supplemental reduction in the 14-day reverse repurchase essentially continues the policy adjustment of the previous round of 7-day reverse repurchase rates.

On July 22, not only was the 7-day reverse repurchase operation rate lowered again to 1.7% after 11 months, but the LPR rate also followed suit, with the 1-year and 5-year and above LPR descending by 10 basis points to 3.35% and 3.85% respectively.

Previously, Soochow Securities analyst Chen Li believed that the continued decline in commercial banks' net interest margin remains a major obstacle to the implementation of monetary policy. However, since the suspension of manual interest rate adjustments in April, some illegal high-interest deposits by companies have been prohibited, leading to a decrease in bank funding costs. This is equivalent to an indirect decrease in deposit rates. Therefore, from an overall perspective, the impact of the July LPR rate reduction on net interest margins is relatively controllable.

The above-mentioned analysts from major brokerage banks believe that the failure of the LPR to continue to decline last week has somewhat exceeded the predictions of most market institutions. This reduction in the 14-day reverse repurchase rate to some extent indicates that the policy focus may still be on short-term interest rates rather than long-term interest rate levels.

The individual believes that since the news of the adjustment of existing home loan rates has been circulating for two weeks, there has been no official denial. Moreover, the market demand has been quite strong, and the majority of market institutions tend to believe that formal operations and implementation are only a matter of time. Of course, this has a significant impact on the profits of the banking industry and requires careful consideration and coordination.