Cai Jing Wang·2024-03-28 09:39Core Viewpoint - The recent phenomenon of "inverted" interest rates for medium to long-term fixed deposits in certain regions has sparked significant discussion, particularly in Guangzhou where the 5-year deposit rates are lower than the 3-year rates, with differences ranging from 15 to 35 basis points [1][4]. Summary by Relevant Sections Interest Rate Trends - In Guangzhou, some banks are offering 5-year fixed deposit rates lower than 3-year rates, with specific examples showing a difference of up to 35 basis points [1][4]. - The official rates from China Construction Bank indicate a 3-year fixed deposit rate of 1.95% and a 5-year rate of 2.00% for "whole deposit whole withdrawal" products [1][2]. Bank Responses and Strategies - Banks are adjusting their deposit rates in response to pressures on interest margins and the need to attract deposits. The trend of lowering long-term deposit rates is a strategy to manage costs associated with long-term liabilities [7]. - A bank representative noted that the current downward trend in interest rates makes it easier to guarantee 3-year rates over 5-year rates, leading to lower 5-year rates [4]. Comparative Analysis - Other banks, such as Industrial and Commercial Bank of China and Guangzhou Bank, have also reported similar trends, with 3-year rates sometimes exceeding 5-year rates [5][6]. - In contrast, banks like China Bank and China Merchants Bank have not exhibited this inverted rate phenomenon, maintaining a smaller difference of around 5 basis points between the two terms [6]. Market Outlook - According to KPMG's report, while the cost pressures on banks' liabilities may ease in 2024 due to ample liquidity, the downward pressure on asset yields is expected to persist, leading to continued narrowing of net interest margins [7].