China's monetary policy is becoming.....>

CHINA RATES: China's monetary policy is becoming increasingly loose despite the

PBOC's official 'neutral and prudent' stance. 

- According to Xinhua News Agency, PBOC Governor Yi Gang has proposed a policy

package to increase bank lending while reducing lending costs to small and

micro-sized firms. The PBOC will raise the cap of relending and rediscounting by

CNY150 billion to support small firms and agriculture, Yi noted. 

- Beijing is finding it increasingly difficult to wean itself off of easy credit

as a policy tool and this is being reflected in the ongoing collapse of interest

rate swaps. 

- The 1-year swap now sits at just 3.01%, just 40bps above that of the US,

making yuan shorts increasingly attractive,