On January 11, CICC’s macro research report pointed out that on January 10, the People’s Bank of China announced that it would suspend the purchase of treasury bond bonds in the open market from January 2025, and would later resume depending on the supply and demand of treasury bond market. CICC believes that the reason why the People’s Bank of China has suspended the purchase and sale of treasury bond bonds is due to the concern about the potential risks of current market pricing. On the one hand, the yield of long-term treasury bond is close to the bottom of the corridor of historical experience, and the investment performance price ratio has declined; On the other hand, the market has taken into account many expectations of interest rate cuts for a “moderately loose” monetary policy, which has already been somewhat anticipated. Looking ahead, CICC believes that reserve requirement ratio cuts and interest rate cuts will continue, but the pace may depend on multiple factors. To lower real interest rates, on the one hand, it is necessary to lower nominal interest rates, but on the other hand, it is also necessary to increase inflation expectations. Against the backdrop of weak demand for private credit, boosting demand and prices largely depends on the intensity and pace of fiscal expansion. In addition, in the context of high risk premiums, the efforts of the central bank in exercising macro prudential and financial stability functions and maintaining financial market stability are also worth paying attention to, rather than just focusing on the operation of adjusting risk-free interest rates.
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