Market Expects Q4 RRR Cut As Short-term Rates Spike

Authorities are expected to cut the reserve requirement ratio (RRR) of large and medium-sized banks by 50bp in Q4 to release more than CNY1 trillion of liquidity to accommodate additional bond supply, according to Ding Shuang, chief economist at Standard Chartered Greater China and North Asia. Wang Qiangsong, head of research at Nanyin Bank expects the short-term bond market to remain volatile in Q4 as the economy improves slowly and the government provides stronger fiscal support. A trader said major banks typically stop lending funds at month end, which has contributed to recent tight conditions. (Source: 21st Century Herald)