Since December 17th, DR007 (7-day repurchase weighted average interest rate for interbank deposit institutions) has continued to decline, and the funding situation has gradually eased. According to data from the National Interbank Funding Center, DR007 was reported at 1.8648% on December 17th and has since dropped to 1.5713% on December 20th. Zhou Maohua, a macro researcher at the Financial Market Department of Everbright Bank, told reporters that the decline of DR007 is mainly due to the recent increase in the central bank's open market operations, coupled with the seasonal decline in bank credit at the end of the year, as well as the release of fiscal funds, and the maintenance of reasonable and loose market liquidity. Last week (December 16th to December 20th), there were multiple disruptive factors in the funding situation, such as large-scale MLF (Medium Term Lending Facility) maturities and peak tax periods. To alleviate the financial pressure, the central bank has increased its efforts in open market operations. On December 16th, in order to hedge against the impact of factors such as the expiration of RMB 1.45 trillion MLF and peak tax periods, the central bank launched RMB 753.1 billion reverse repurchase operation, which is also the largest operation since the beginning of this month. Subsequently, from December 17th to 20th, reverse buybacks worth 355.4 billion yuan, 387.6 billion yuan, 80.6 billion yuan, and 101.6 billion yuan were carried out respectively, with a cumulative investment volume of 1678.3 billion yuan in one week. From the perspective of effectiveness, the central bank's open market operations have effectively curbed the upward trend of funding interest rates. Generally speaking, at the end of the month, the capital situation is prone to tightness, and market capital prices tend to rise. However, in recent months, the end of month funds have become loose, and the price of funds has shown a downward trend. This mainly depends on the central bank's adjustment of the time point and method of funding, including the extension of the MLF renewal time to the 25th of each month (postponed in case of holidays), and the addition of buy out reverse repo, treasury bond bond trading and other operations, which help to maintain market liquidity in a reasonable and abundant state. Looking forward to the later stage, Zhou Maohua believed that the Central Bank would continue to flexibly adjust through open market operations, MLF continuation, buyout reverse repo, treasury bond bond trading and other tools, so as to maintain reasonable and sufficient liquidity and stable capital over the years. Currently, the expectation of reserve requirement ratio cuts is also heating up. Wang Qing, Chief Macro Analyst of Dongfang Jincheng, told reporters that although the peak of local bond issuance has passed, the focus is on supporting banks to increase credit injection, continue to support government bond issuance, and continue to release signals of stable growth. By the end of the year, the central bank may lower the reserve requirement ratio by 0.25 percentage points to 0.5 percentage points, releasing funds of 500 billion yuan to 1 trillion yuan, which can also take into account the liquidity arrangement during the Spring Festival. In addition, we are currently in the stage of implementing a package of incremental policies, and the central bank will comprehensively use policy tools to maintain sufficient market liquidity. At the end of the year, the volatility of the capital market will be significantly lower than in previous years. (New Society)