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30Y Yields Test 10.50 Support, SAGBs Bull Flatten W/w

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The following lists highlights from Chinese press reports on Tuesday:

  • The PBOC may increase liquidity injection via reverse repos, renew maturing MLFs with excess, or even cut banks' reserve ratios, to keep year-end liquidity stable and prevent any upsurge in market rates, the Securities Daily reported citing analyst Wang Qing with Golden Credit Rating. Increasing reverse repos and MLF can meet the liquidity gap in December, but an RRR cut is still possible by yearend if the PBOC is to send a pro-growth signal and boost credit and aggregate finance, Wang was cited as saying. There will be CNY950 billion MLF maturing in December, which will be the second-highest this year, along with local government bond issuance, and assessment on banks to drain liquidity, the daily said.
  • China should consider increasing the allocation of U.S. dollar assets in its foreign exchange reserves, adhere to a prudent monetary policy, improve global policy communication and establish a risk warning system to effectively respond to the impact of the shift in U.S. monetary policy, said the Economic Daily in a commentary. The rebound of the dollar index will help ease the continued appreciation pressure of the Chinese yuan, though the currency will still be supported by China’s exports and move in two ways, the newspaper said. The narrowing China-U.S. interest spread may lead to faster foreign capital outflows, and commodity prices may become more volatile, the newspaper said.
  • Debt raised through China’s so-called local government financing vehicles rose to CNY5.1 trillion this year, CNY400 billion more than the previous record, as loose liquidity helped these entities owned by local authorities borrow more funds, the 21st Century Business Herald said using data by Wind. As usual, most of the money raised was for repaying debt and the net capital raised, at CNY1.65 trillion, was lower than that of 2020, it said. Under China’s tiered management of these debt instruments, the proportion of lower-credit debt has declined, the more developed regions are raising more debt while debt by those of low credit standings has sharply fallen, said the newspaper. As of Nov. 28, China’s outstanding LGFV debt stood at CNY12.75 trillion, the newspaper said.