Goldman Sachs' Money Market Overview

Goldman Sachs have noted that "in the very near term, we think the combination of seasonal liquidity demand, the focus on controlling financial leverage, and the healthy growth momentum may translate into continued tightness and elevated repo rates in the interbank market. We expect the PBOC to employ its various tools to meet the seasonal swings in liquidity demand, like it did in previous years, to avoid extreme increases and volatility in front-end rates. But the supply and demand balance may stay on the tighter side in the short run."

• "Looking beyond the immediate future, we emphasize our neutral view on monetary policy stance. Significant vulnerabilities remain in the Chinese banking system and credit market. The economy - SMEs and local governments in certain regions in particular - probably cannot handle a significant tightening in monetary policy at the moment. Thus, we expect no changes in OMO and MLF rates."
• "With the OMO rate as the de facto short-term policy rate in PBOC's current monetary policy framework, we think market rates should fluctuate around the OMO rate. Similar to what we saw over the past month where the 7-day repo rate among depository institutions (DR007) reverted up to the OMO rate after falling notably below it, we think DR007 is likely to revert down to the OMO rate if it goes much higher than 2.2%."