China cuts rates on policy loans, analysts point to more easing ahead

17/1/2022 5:46:00 AM
China cuts rates on policy loans, analysts point to more easing ahead

China cuts rates on policy loans, analysts point to more easing ahead

China cuts rates on policy loans, analysts point to more easing ahead

SHANGHAI: China\u0027s central bank on Monday (Jan 17) cut the borrowing costs of its medium-term loans for the first time since April 2020, defying market expectations, to cushion any economic slowdown. The People\u0027s Bank of China (PBOC) said it was lowering the interest rate on 700 billion yuan (US$110.19 bill

SHANGHAI: China's central bank on Monday (Jan 17) cut the borrowing costs of its medium-term loans for the first time since April 2020, defying market expectations, to cushion any economic slowdown.The People's Bank of China (PBOC) said it was lowering the interest rate on 700 billion yuan (US$110.19 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points to 2.85 per cent from 2.95 per cent in previous operations.

Thirty-four out of the 48 traders and analysts, or 70 per cent of all participants, polled by Reuters last week predicted no change to the MLF rates, although a rising number of market participants start to forecast a rate cut.The world's second-largest economy has shown signs of slowing after a rapid rebound from the COVID-19 slump, with concerns about the financial health of property developers and the rapid spread of the Omicron coronavirus variant clouding the outlook.

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China cuts rates on policy loans for first time since April 2020SHANGHAI: China\u0027s central bank on Monday (Jan 17) cut the borrowing costs of its medium-term loans for the first time since April 2020, defying market expectations, to cushion any economic slowdown. The People\u0027s Bank of China (PBOC) said it was lowering the interest rate on 700 billion yuan (US$110.19 bill

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LinkedIn SHANGHAI: China's central bank on Monday (Jan 17) cut the borrowing costs of its medium-term loans for the first time since April 2020, defying market expectations, to cushion any economic slowdown.LinkedIn SHANGHAI: China's central bank on Monday (Jan 17) cut the borrowing costs of its medium-term loans for the first time since April 2020, defying market expectations, to cushion any economic slowdown.LinkedIn BEIJING : China should keep improving institutional systems to prevent and resolve local government debt risks, the country's vice finance minister said on Saturday.LinkedIn BEIJING : China has made progress in cleaning up non-compliant wealth-management products (WMPs), a senior regulatory official said on Saturday, as he declared a transition period in a years-long clampdown on the sector"basically complete".

The People's Bank of China (PBOC) said it was lowering the interest rate on 700 billion yuan (US$110.19 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points to 2.19 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points to 2.85 per cent from 2. China will also crack down on illegal and irregular debt raising, and back-door debt financing, he said.95 per cent in previous operations.95 per cent in previous operations. Thirty-four out of the 48 traders and analysts, or 70 per cent of all participants, polled by Reuters last week predicted no change to the MLF rates, although a rising number of market participants start to forecast a rate cut. Cao said that financial trust products accounted for a steadily decreasing proportion of WMPs, with non-compliant trust products, used by some companies for financing, plunging more than 80per cent.

The world's second-largest economy has shown signs of slowing after a rapid rebound from the COVID-19 slump, with concerns about the financial health of property developers and the rapid spread of the Omicron coronavirus variant clouding the outlook. With 500 billion yuan worth of MLF loans maturing on Monday, the operation resulted in a net 200 billion yuan of fresh fund injections into the banking system. "The PBOC's decision to ease early in January suggested that economic downward pressure intensified at end-2021 and room for improvements in the first quarter of this year is not huge," said Ken Cheung, chief Asian FX strategist at Mizuho Bank. Cheung expects that the PBOC could deliver more easing measures this year than previously expected by market analysts.10 per cent from 2. Such expectations were also reflected in the bond market, with China's 10-year treasury futures rising to their highest level since June 2020 and the yield on China's benchmark 10-year government bonds falling more than 2 basis points in early trade. Market analysts said the size of the rate cut and the timing were a big surprise, and they believe further monetary stimulus could follow. Source: Reuters/gs.

"The 1Y LPR signalled that another rate cut was coming," said Carlos Casanova, senior Asia economist at Union Bancaire Privee in Hong Kong. "However, the 10 bps cut was larger than expected, suggesting that the authorities have become more preoccupied about weakness in the economy," he said, adding he also expects an additional 100 bps reduction to banks' reserve requirement ratio (RRR) this year. With 500 billion yuan worth of MLF loans maturing on Monday, the operation resulted in a net injection of 200 billion yuan into the banking system. The central bank also lowered the borrowing costs of seven-day reverse repurchase agreements, or repos, by the same margin to 2.10 per cent from 2.

20 per cent, when it offered another 100 billion yuan worth of reverse repos into the banking system. Source: Reuters/gs .