Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
The People's Bank of China is keeping liquidity stable across the interbank market in coming weeks, maintaining a "reasonable and ample" level as it continues to support the real economy through steady policy measures, the latest MNI Liquidity Conditions Index shows.
The Liquidity Condition Index slid to 75.0 in September from August's 7-month high 84.4, with 18.8% respondents reporting easier liquidity conditions from last month.
The higher the index reading, the tighter liquidity appears to survey participants.
The perception of increased liquidity came as the central bank conducted CNY600 billion MLFs in the month to offset the maturing CNY200 billion MLF, and drained a net CNY110 billion via reverse repos in September, MNI calculated.
"Fiscal expenditure and quarter-end timing are two major factors affecting conditions," a trader with a state-owned bank in Nanjing told MNI, explaining government spending and PBOC actions always help liquidity at this time of year, ahead of the week-long autumn holidays.
ECONOMY IMPROVES
The Economy Condition Index climbed up to 90.6 in September from 87.5 last month, the second time it has been above 90 in the last three months. More than 80% of participants reported an improving condition, an outlook backed up by steadily improving data.
The PBOC Policy Bias Index fell to 59.4 in September from 68.8 in August, with more traders (81.3% Vs 62.5% in August) believing the prudent policy will dominate in coming months, accepting at face value the steady as she goes comments from Sun Guofeng, head of the PBOC's Monetary Policy Department, at a State Council briefing on Aug 25.
The Guidance Clarity Index edged down to 65.6 in September from previous 71.9, as 12.5% more traders seeing clearer PBOC guidance.
The 7-Day Repo Rate Index picked up to 75.0 from last 65.6 -- nearly 70% of the participants predicted the rates will rise in coming weeks due to the timing. "Cash will run tighter towards the end of the month/quarter to meet the MPA when the short end yields could surge," the Nanjing based trader added.
The 7-day weighted average interbank repo rate for depository institutions (DR007) closed at 2.3907% Tuesday. The 10-year CGB Yield Index rose for the first time in four months to 65.6 in September, up from 43.8 recorded in August – half traders forecasting an increasing trend for long end bond.
"There will be bond supply pressure in the coming month, a shortage of funding will result in risings yield," a senior trader based in Shanghai told MNI.
The MNI survey collected the opinions of 16 traders with financial institutions operating in China's interbank market, the country's main platform for trading fixed-income and currency instruments, and the main funding source for financial institutions. Interviews were conducted Sep 14 – Sep 25.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.