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Needle Still Points South

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Heading North

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Bull Rally Accelerates

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Economists Survey Raises 2021 CPI Forecast To 4.9%

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The PBOC's MLF will come due today, there is a chance it could be rolled over with a larger amount. China Securities Journal reported as much earlier this week in a bid to signal the Central Banks intention to maintain liquidity in the banking system, particularly as the pre-Golden Week liquidity is drained via OMO's and the PBOC signals its is uncomfortable with a stronger yuan via the fix.

  • As a reminder, CNY 500bn of MLF funds mature today, while a total CNY 510bn of reverse repo funds will roll off this week.
  • Another factor in the PBOC's thinking will be inflation, CPI dipped while PPI rose to the highest since 1995, however the two measures have showed limited pass through which could leave the PBOC room to adjust policy.
  • Sell side analysts are split on direction of policy in China, both ANZ and Citi say there could be an RRR cut as early as next month while others, including Nomura, think this is unlikely.