China Could Target Liquidity Obliquely

The PBOC matched injections with maturities today the second consecutive day of liquidity stasis, and third in the last four after a symbolic net injection of CNY 10bn on Monday. Overnight repo rates are steady around 1.4692%, some 11bps higher on the day.

• A piece in the China Securities Journal is doing the rounds which posits that the PBOC could announce a reduction in RRR later in March, the move would benefit banks and equate to a liquidity injection of around CNY 120bn.
• Elsewhere, bond futures are slightly higher, but off highs for the day, 10-year contract last at 96.89 after touching 97.015 earlier.
• Data released showed Caixin services PMI fell to 51.5 from 52.0 in February, this saw the composite print drop to 51.7 from 52.2 previously. Services activity growth eased to ten-month low, total new work increased at a slower pace amid renewed drop in export sales. Confidence regarding the 12-month business outlook remains robust. "Now the major challenge for policymakers will be maintaining the post-coronavirus recovery while paying close attention to inflation," said Caixin in survey results.
• Markets still await results of the NPC, it is expected that policies announced at the meeting will focus on supporting the economy as it recovers, and addressing structural issues in the economy to facilitate long term growth.