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Bank Of America Sees Rate Hike In October 2021


(U1) Fades Off 2021 Highs

     TRADE: China is reluctant to confirm details of promised purchases of U.S.
goods agreed under its phase one trade deal with Washington, policy advisors
told MNI, pointing to sensitivities over World Trade Organization rules and
possible objections by other countries. 
     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations
on Tuesday, leaving liquidity unchanged as no reverse repos mature today,
according to Wind Information. Total liquidity in the banking system is
reasonable and ample, the PBOC said.
     RATES: The seven-day weighted-average interbank repo rate for depository
institutions (DR007) increased to 2.5672% from Monday's close of 2.4964%, Wind
Information showed. The overnight repo average rose to 2.5033% from Monday's
     YUAN: The yuan strengthened to 7.0024 against the U.S. dollar from Monday's
close of 7.0027. PBOC set the dollar-yuan central parity rate higher for the
first day in six at 6.9971, compared with Monday's 6.9915.
     BONDS: The yield on 10-year China Government Bond was last at 3.2200%,
higher than Friday's 3.1975%, according to Wind Information. 
     STOCKS: The Shanghai Composite Index gained 1.27% to 3,022.42, led by
financial sector shares. Hang Seng Index edged up 1.12% to 27,817.49. 
     FROM THE PRESS: China's former Finance Minister Lou Jiwei recommended the
ministry issuing CNY10 trillion special bonds to purchase half of the central
bank's foreign reserves and boost monetary policy tools, according to China
Securities Times. The current mechanisms for monetary policy are less flexible
because they are less transparent and costly, the newspaper said citing Lou.
     The PBOC is expected to cut interest rates in January to meet rising
liquidity needs due to Chinese New Year, government bond issuances and bank
loans, the Shanghai Securities News reported citing Yan Se, Chief Economist with
Founder Securities.
     The RMB-USD exchange rate may remain volatile in a range between 6.9 and 7
yuan in the future, according to a report in the China Securities Journal. The
Journal's report, which cited estimates from various market participants, said
the current valuation of RMB assets is generally low and therefore attractive to
foreign investors. Wen Bin, the Chief Analyst with Minsheng Securities, expected
the RMB to appreciate slightly, the report said.
--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email:
--MNI Beijing Bureau; +86 10 8532 5998; email:
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