ANZ note that "the People's Bank of China.....>

CHINA: ANZ note that "the People's Bank of China (PBoC) has announced a

reduction of 100bps in the required reserve ratio (RRR) for major banks, a move

which will likely release net liquidity of CNY400bn after excluding outstanding

medium-term lending facilities (MLF). The move is neutral from a quantitative

point of view, as it hints at the authorities' efforts to deleverage by

controlling the growth of debt quantitatively. We estimate the excess reserve

ratio may rise to 1.3%, which is its average level over the past quarters. The

MLF rate is above 3% compared with the opportunity cost of 0.72% for the

liquidity released by the RRR cut. The latter may signal that the authorities

probably want to avoid a sharp rise in corporates' funding costs amid the

ongoing deleveraging. We maintain our view that long-end CGB yields should trend

higher, but we are tweaking our forecast for 10-year CGB yield to 4.0% by

year-end, compared with 4.35% previously."