Liquidity Rollover And Unchanged Rates Foreseen At Today’s MLF Operations

Note that CNY100bn of 1-Year MLF will mature today, with 6 of those surveyed by BBG looking for a CNY100bn rollover (no net injection) while the remaining 2 surveyed look for a CNY200bn offering from the PBoC (which would inject a net CNY100bn of medium-term liquidity into the system).

• All of the 18 economists surveyed by BBG look for the PBoC to leave the rate applied to the MLF operations unchanged at 2.85%.
• Note that the interbank 7-day repo rate is trading comfortably below the 2.10% rate applied to the PBoC’s 7-day reverse repo operations, which led to the head of the PBoC’s monetary policy department recently noting that liquidity in the interbank market is more than “reasonably ample,” with markets seeing this as an indication that further interest rate cuts are unlikely, at least in the immediate window.
• Further out, the continued headwinds faced by the Chinese property sector coupled with the stop-start nature of localised COVID restrictions mean that the prospect of further easing continues to loom (although refusal of some mortgage holders to complete mortgage payments covering incomplete developments means that credit risk in the Chinese property market is rising, which may limit the scope for further easing).