Larger Cut Expected For 5yr LPR Today

A reminder today sees China's 1yr and 5yr LPR outcomes. The consensus sits firmly in the camp of rate cuts, which fits with last week's cuts for the PBoC 7-day repo, SLF and MLF cuts, all of which were moved down by 10bps.

• For the 5yr LPR, the consensus sits at a 15bps cut, which would take the rate to 4.15%, from 4.30%. Note though that the Bloomberg survey only contains 9 respondents, with 5 out of the 9 forecasting a 15bps cut, the remainder a 10bps cut. So it is somewhat of a close call.
• For the 1yr LPR, the consensus is more clearer in terms of forecasting a 10bps cut (10 out of 11 economists surveyed expect this). This would take the rate to 3.55% from 3.65%.
• A larger reduction for the 5yr LPR would match with the last cuts, from August last year. The 1yr was cut 5bps, the 5yr by 15bps at that time.
• The 5yr rate is associated more with mortgage related loans, so a larger cut for this segment would fit with the aim of helping the still struggling property sector.
• The moves are unlikely to change views around the need for further stimulus. Confidence also needs to rise, to boost the demand for credit in the property related segment.