MLF Operation Eyed

The PBOC matched maturities with injections again today, repo rates currently steady and within recent ranges; the 7-day repo rate last at 2.1932% just below the PBOC's 2.20% rate. The PBOC cut the RRR by 0.5ppts for most banks last week, a move that is estimated to release around CNY 1tn of liquidity into the system, markets await the results of the MLF tomorrow to see if the PBOC lets the full CNY 400bn roll off and thus reduce the implied additional liquidity. The PBOC said its prudent monetary policy remained unchanged. Part of the liquidity released will help financial institutions to repay maturing MLF loans, and will also help ease liquidity pressure caused by tax payments, it said. ING says its expects "the PBoC to provide even more liquidity to the market. If the government really thinks the economy is not doing as well as expected, the 1Y MLF interest rate could be lowered to 2.7% from 2.95%." Futures are higher in China, 10-year up 7 ticks, yields slightly higher today ahead of a 5- & 7-year auction, yields on the 10-year hit the lowest since July 2020 yesterday.