Core Viewpoint - The regulatory authority has implemented new rules to control high-interest interbank demand deposits, aiming to reduce the scale of such deposits and improve the efficiency of monetary policy transmission [4][12][15]. Summary by Sections Regulatory Changes - Starting from March 16, banks are required to limit the scale of interbank demand deposits with interest rates exceeding 1.40% to 10%-20% of their total interbank deposits [3][6]. - In the first half of last year, high-interest interbank demand deposits amounted to approximately 11.69 trillion yuan, accounting for 44.44% of total interbank deposits [3][7]. Impact on Banks - Banks are taking measures to comply with the new regulations, including suspending the issuance of high-interest interbank demand deposits and negotiating to lower rates below 1.40% [6][8]. - The average interest rate for deposits at banks was 1.47%, while the rate for high-interest interbank demand deposits was around 2.025% [13]. Benefits for Large State-Owned Banks - The reduction in high-interest interbank demand deposits is expected to benefit large state-owned banks and joint-stock banks, with their overall funding costs decreasing by 0.75 and 0.98 basis points, respectively [7][12]. - If the proportion of high-interest interbank demand deposits falls below 10%, net interest margins for these banks could increase by 0.69 and 0.95 basis points [7]. Market Reactions - Investment managers are actively seeking alternative fixed-income products to replace high-interest interbank demand deposits, as the new regulations create downward pressure on yields [2][3][19]. - The anticipated decline in interbank demand deposit rates may lead to a broader decrease in market interest rates, affecting the yields of other financial products [19][20]. Asset Management Challenges - Cash management products are facing pressure to maintain yields above their performance benchmarks, which are currently tied to the central bank's 7-day notice deposit rate [17][19]. - The expected decline in high-interest interbank demand deposits could lead to a significant drop in overall yields for cash management products, with estimates suggesting a decrease of 1.47 basis points if rates fall from 1.60% to 1.40% [18][19].

Core Viewpoint - The article discusses the downward trend in yields for cash management and fixed-income products, driven by a declining interest rate environment and regulatory changes affecting interbank deposit rates [3][5][11]. Group 1: Interest Rate Trends - The annualized yield of a popular money market fund has dropped to 1.034%, reflecting a broader trend of declining yields in cash management products [3][5]. - Interbank deposit rates are expected to decrease further due to regulatory discussions aimed at managing these rates more transparently, which will likely pressure the yields of funds and wealth management products [5][11]. Group 2: Regulatory Changes - The People's Bank of China is considering stricter self-regulation for interbank deposit rates, which may include quantitative constraints on the proportion of deposits exceeding the 7-day reverse repo rate [7][8]. - By the end of 2024, new self-regulatory mechanisms will bind interbank deposit pricing to macro-prudential assessment frameworks, potentially impacting the volume and pricing of interbank deposits [7][8]. Group 3: Market Reactions - Analysts predict that if interbank deposit rates are lowered by 10 basis points, it could reduce banks' interest expenses by approximately 37 billion yuan annually, affecting the cost of liabilities [11][12]. - The average yield of wealth management products has already fallen to 1.98%, with many cash management products yielding below 1% [12][13]. Group 4: Future Outlook - The anticipated tightening of interbank deposit regulations is expected to lead to increased demand for certificates of deposit and short-term bonds, which may benefit from a lower cost of liabilities [10][14]. - The market has already begun to reflect these changes, with yields on one-year certificates of deposit dropping below 1.55% [14].