The Zhitong Finance App learned that CITIC Securities released a research report saying that the first quarter goods policy meeting proposed a new “focus on long-term yield changes”, which attracted market attention. Combined with other statements at this regular meeting, reducing financing costs is still one of the main goals of current monetary policy; the main reason interest rates remain low in this round of economic recovery may be that current economic growth is driven by a recovery in manufacturing investment rather than real estate investment. The central bank's focus on long-term interest rate changes may indicate a policy intention to maintain stable interest rates, but this does not mean that it will actively push up interest rates or change the broad monetary orientation.

The views of CITIC Securities are as follows:

The central bank's 2024Q1 goods policy meeting first proposed “focusing on long-term yield changes”, which attracted market attention

CITIC Securities pointed out that since this year, the interest rate center on 10Y treasury bonds has declined to around 2.3%, and interest rates on 30Y treasury bonds have declined to around 2.3%, while interest rates on 30Y treasury bonds have declined to 2.47%, all of which are at historic lows. The 2024Q1 commodity policy meeting first raised concerns about changes in interest rates, causing the market to worry about whether the central bank will change its monetary policy direction in the future and even actively guide market interest rates to rise.

Reducing financing costs is still one of the main goals of current monetary policy

The conference believed that it is necessary to “improve the mechanism for the formation and transmission of market-based interest rates... promote a steady decline in corporate financing and residents' credit costs”. Currently, residents' willingness to buy houses with leverage is still weak, and it is still necessary to keep interest rates relatively low. On the other hand, actual interest rates, whether measured in terms of CPI year over year or PPI year over year, are higher than the US level for the same period, and price-side instruments may still be necessary to pressure down residents' and business-side financing costs.

The key to whether economic recovery can drive interest rates back up is the economic structure

This regular goods policy meeting proposed new medium- and long-term loans to the manufacturing industry that are “in demand by the market,” while the central bank is concerned about changes in long-term interest rates, which may be aimed at improving capital efficiency and preventing liquidity traps. CITIC Securities believes that in the past, the rise in long-term interest rates during China's economic recovery was largely due to an upward trend in the real estate cycle; currently, real estate investment and sales have not shown significant recovery momentum. China's current round of economic recovery is more dependent on a recovery in manufacturing investment, which has had little impact on interest rates.

Paying attention to changes in long-term interest rates does not mean actively pushing up interest rates; the central bank's monetary easing target has not changed

The decline in medium- to long-term interest rates in this round of economic recovery is the result of structural divisions in economic repair, not the reason. At the same time, the low interest rate environment is conducive to the growth of investment in manufacturing and the restoration of financing needs. Overall, the central bank mentioned in the first quarter goods policy meeting that the focus on long-term yield changes reflects the policy intention to maintain interest rate stability to a certain extent, but in the light of the current economic environment, CITIC Securities believes that it is unlikely that the central bank will actively push up interest rates or even shift to austerity.

risk factors

Monetary policy operations exceeded expectations, real estate investment recovery exceeded expectations, etc.