CITIC Securities has released a report stating that risks of upward movement in negotiable certificate of deposit (CD) rates are manageable, with the 1.75% level identified as a favorable entry point for institutional allocation. Drawing insights from the 2024 deposit rate cut impact, the report notes that market logic may shift from “supply-driven shocks” to “demand-led trends,” causing rates to rise initially before declining. While June’s “massive” CD maturities may trigger short-term volatility, the report emphasizes that supportive monetary policies and stable liquidity conditions will limit rate upside.
2024 Deposit Rate Cut Impact: A Historical Retrospective
Reviewing market dynamics after the 2024 termination of manual deposit interest rate supplements, CITIC observes a transition from “supply-dominated” to “demand-dominated” trends, with CD rates first rising then falling:
Initial Phase: At the outset of the “deposit migration” trend, severe bank liability outflows forced aggressive CD issuance, with supply pressures driving rate increases.
Subsequent Phase: As liquidity pressures from the deposit rate rectification eased, growing non-bank asset management product scales boosted CD allocation demand, leading to rate declines.
June Maturities: Heightened Supply Concerns, Limited Upside Risks
CD yield movements correlate with maturity volumes and net financing, particularly during tight liquidity periods
Historical Pattern: Elevated maturities or net financing typically push CD rates higher, as seen in late 2022–early 2023 and early 2025.
June Outlook: With a sharp increase in CD maturities, banks must issue large volumes of new CDs for hedging, potentially driving rates to short-term peaks. However, the report stresses that the People’s Bank of China’s (PBOC) proactive liquidity management will cap upward momentum.
PBOC’s Early-Month OMO Intervention
On June 5, the PBOC announced 1 trillion yuan in outright repo operations—the first early-month disclosure of such measures, deviating from the previous end-of-month announcement routine. This interventionProvides tangible liquidity support.Enhances policy transparency and market confidence through improved expectation management.
Forward Outlook: From Supply Shocks to Demand-Driven Trends
Logical Shift: Mirroring the 2024 pattern, the market is expected to transition from “supply shock” to “demand dominance,” with rates following a “rise-then-fall” trajectory.
Strategic Allocation: Despite short-term disruptions from June’s maturity surge, CITIC advises institutions to consider accumulating CDs near 75%, citing the PBOC’s accommodative stance and stable funding conditions.
Risks：
- Unexpected tightening of liquidity conditions
- Policy deviations from market expectations
- Unanticipated twists in U.S.-China tariff negotiations
- Discrepancies between economic fundamentals and forecasts
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