Since the central bank's treasury bond bond trading operation was suspended in January this year, the market's expectation of resuming the trading operation is gradually heating up in the near future. The joint working group of the Ministry of Finance and the People's Bank of China recently held the second group leader meeting, which conducted in-depth discussions on issues such as government bond issuance management, central bank treasury bond bond trading operations, etc. Experts said that the above situation may mean that the probability of the central bank resuming treasury bond trading before the end of this year is increasing. The fiscal policy and monetary policy will better coordinate and cooperate, and be more active in maintaining sufficient market liquidity, stabilizing the operation of the financial market, and helping the economy recover. Good results have been achieved in policy coordination Since the Ministry of Finance and the Central Bank established a joint working group last year, fiscal and monetary policies are strengthening coordination and cooperation. The central bank's treasury bond trading operation is an important manifestation of this. Starting from August 2024, in order to increase the countercyclical adjustment of monetary policy and maintain sufficient liquidity in the banking system, the central bank purchased net bonds with face values of 100 billion yuan, 200 billion yuan, 200 billion yuan, and 300 billion yuan each month from August to December of that year, with a cumulative net purchase of 1 trillion yuan. Also in October of the same year, the joint working group of the Ministry of Finance and the Central Bank held its first formal meeting. Both sides agreed that the purchase and sale of central bank treasury bond is an important means to enrich the monetary policy toolbox and strengthen liquidity management. The People's Bank of China has previously said that the central bank's purchase and sale of treasury bond is mainly targeted at the issuance of basic currency and liquidity management, which can be both bought and sold. By flexibly matching with other tools, it can improve the scientificity and accuracy of short-term, medium and long-term liquidity management. Zhang Xu, chief fixed income analyst of Everbright Securities, said that the central bank's purchase and sale of treasury bond bonds reflected that the counter cyclical regulation of monetary policy was further strengthened, focusing on expanding domestic demand, boosting confidence, and promoting a sustained recovery of the economy. In addition, the coordination and cooperation between fiscal policy and monetary policy are also reflected in the central bank's comprehensive use of various tools to increase liquidity injection and safeguard government bond issuance. This year, the scale of government bond issuance has expanded and the pace has accelerated, with almost all months in the peak stage of issuance. Since the beginning of this year, the central bank has timely cut interest rates and reserve requirement ratios, continued to carry out medium-term lending facility (MLF) and buyout style reverse repurchase to maintain sufficient market liquidity, providing a favorable monetary and financial environment for government bond issuance. ”Wang Qing, Chief Macro Analyst of Dongfang Jincheng, said. The restart has a more appropriate market environment. With the central bank's treasury bond bond trading operation being discussed in depth at the second leader meeting of the joint working group of the Ministry of Finance and the central bank, the market's expectation of the central bank's restart of treasury bond bond trading by the end of this year is rising. Previously, the Central Bank announced that it had decided to suspend the purchase of treasury bond bonds in the open market from January 2025, and it would later resume depending on the supply and demand of the treasury bond bond market. For the reason for the suspension, the central bank mentioned that "the government bond market has been in short supply recently". From the current operation of the bond market, Wang Qing believes that, considering the recent 10-year treasury bond yield has risen to around 1.8%, the term interest margin has widened, and the later stable growth policy is expected to moderately exert force, the Central Bank is likely to resume trading of treasury bond in the fourth quarter of this year, and inject long-term liquidity into the banking system in combination with the RRR reduction. "This will not only help promote the steady and healthy development of China's bond market, but also guide financial institutions to increase credit supply before the end of this year, strengthen countercyclical regulation, and successfully complete the annual economic and social development goals," he said. "In different market patterns, the same net purchase volume of the central bank has different effects on the yield of treasury bond. ”Zhang Xu gave an example to analyze that the bond market was in a "bull market mentality" in December last year, so the small net buying volume of the central bank could have a significant impact on interest rates. Judging from the recent situation, the yield of 10-year treasury bond at the end of August was about 20 basis points higher than that at the end of June. In this market pattern, the downward pressure on bond yields from the central bank's purchase of treasury bond will be significantly weaker than that in December last year. Therefore, for the resumption of treasury bond trading, there is a more appropriate market environment at this time. In addition, Zhang Xu predicted that the supply scale of government bonds is expected to further increase in the next few years. treasury bond trading tools can play the role of liquidity management. The Central Bank will also strengthen coordination with the financial department in terms of bond issuance scale, structure, rhythm, etc., to create a suitable environment for the issuance of government bonds. Experts suggest that from the current macro environment, fiscal policy and monetary policy will work together in the near future to fully unleash their synergistic effects. This is an important focus for relevant departments to stabilize macroeconomic operations and continuously prevent and resolve risks in key areas at the current stage. In addition to the central bank's treasury bond bond buying and selling operation, the second team leader meeting of the joint working group of the Ministry of Finance and the central bank also conducted in-depth discussions on issues such as financial market operation, government bond issuance management and improving the offshore RMB treasury bond bond issuance mechanism. Compared with the first group leader meeting held by the joint working group of the Ministry of Finance and the People's Bank of China last year, the second group leader meeting focused on a wider range of issues related to the coordination and coordination of fiscal and monetary policies, providing strong guarantees for responding to the current complex and changing market environment and promoting sustained economic recovery and improvement. ”The Chief Economist of CITIC Securities clearly stated. The synergy between monetary policy and fiscal policy is expected to be further enhanced. Sun Binbin, chief economist of Caitong Securities, said that from issues such as financial market operation, government bond issuance management and improving offshore RMB treasury bond bond issuance mechanism, the subsequent bond issuance structure and rhythm may be further optimized, and the central bank's liquidity delivery rhythm will also be more consistent with the bond issuance rhythm, so as to maintain the stable operation of the bond market. Better coordination and coordination between fiscal policy and monetary policy can help stabilize economic growth and boost domestic demand. It is expected that the coordination and cooperation of fiscal and monetary policies will be more active in maintaining sufficient market liquidity, stabilizing the operation of the financial market, buying and selling treasury bond by the Central Bank and issuing offshore RMB treasury bond. ”Clearly stated. (New Society)