MNI EUROPEAN OPEN: PBoC Continues To Adjust Liquidity On Seasonal Matters

EXECUTIVE SUMMARY

• 'WE HAVE A DEAL:' BIDEN OK'S $1.2 TRILLION INFRASTRUCTURE PLAN (RTRS)
• MANCHIN: DEMOCRATIC-ONLY INFRASTRUCTURE BILL 'INEVITABLE' (THE HILL)
• MCCONNELL SLAMS BIDEN FOR ALREADY 'CAVING' TO LEFT ON INFRASTRUCTURE DEAL (THE HILL)
• ECB'S SCHNABEL WARNS GOVERNMENTS NOT TO END CRISIS SUPPORT EARLY (BBG)
• PBOC MAKES ANOTHER CNY20BN NET INJECTION VIA OMOS
• MEXICO'S CENTRAL BANK SURPRISES WITH INTEREST-RATE HIKE (BBG)

Fig. 1: RBNZ 1-Year/1-Year Forward Swap Rate (%)

Source: MNI - Market News/Bloomberg

UK

CORONAVIRUS: Britons who have received both doses of a coronavirus vaccine will be given extra freedom to travel around the world, Prime Minister Boris Johnson said, as the U.K. prepares to set out new rules on foreign trips. British officials have been weighing up allowing people who have been fully vaccinated to return to England without the need to quarantine for 10 days after visiting medium risk destinations. Johnson signaled on Thursday that the government will move ahead with the plan. (BBG)

CORONAVIRUS: The U.K. added Spain's Balearic islands and Malta onto its quarantine-free "green" travel list, and said rules will be relaxed for more countries later for people who are double-vaccinated against coronavirus. The announcement on Thursday is a boost to the country's ailing airlines and travel industry ahead of the school holidays which begin next month. Bermuda, Madeira, and a number of Caribbean destinations were also added to the list. (BBG)

BREXIT: The EU is unlikely to grant U.K.-based financial firms automatic market access in all areas post-Brexit, according to a top British minister. "It's realistic to assume that probably we're not going to get equivalences in every area, given the atmospherics coming out of Brussels," U.K. Brexit minister David Frost said in a webinar Thursday. "But I think the City feels pretty confident about that." The ability for London-based businesses to provide financial services into the EU is one of the remaining issues to be resolved in Britain's post-Brexit relationship with the bloc, and talks are ongoing. An accord on how EU and U.K. financial regulators would cooperate has run into problems as relations have soured, and the European Commission has indicated it's in no hurry to give the so-called equivalence decisions that would allow European business to be done from London. (BBG)

BREXIT: Britain and the European Union have expressed cautious optimism that an agreement is possible over the Brexit deal for Northern Ireland. Simon Coveney, the Irish foreign minister, said that Dublin was "making the case strongly at an EU level for flexibility and pragmatism" around the Northern Ireland protocol after a meeting with British ministers. Joao Vale de Almeida, the EU ambassador to London, said that Brussels was "turning our regulations upside down to try to find a solution to this problem". As part of a choreographed deal the EU is expected to grant the UK a three-month extension to the grace period, allowing processed meat such as sausages to continue to be sent to Northern Ireland after July 1. (The Times)

BREXIT: The deterioration in relations with the EU, partly driven by the Northern Ireland "sausage war", has come as a surprise to those, who campaigned to leave the bloc five years ago, the government has admitted. The Brexit minister, David Frost, said they had dreamed of a sovereign Britain, which could set forth on a global mission while maintaining friendly relations with its neighbours. (Guaridan)

ECONOMY: British automotive production more than halved in May compared with the same month in 2019, before the coronavirus pandemic, as a global shortage of semi-conductors and other components continued to weigh on car plants. The output of 54,962 cars was down 52.6% from May 2019 although it was 10 times the figure for May 2020 when Britain was in the grip of a first coronavirus lockdown, the Society of Motor Manufacturers and Traders (SMMT) said. Mike Hawes, SMMT chief executive, said the recovery of production faced a massive challenge in Britain and beyond because of the supply shortages. (RTRS)

EUROPE

ECB: European Central Bank Executive Board member Isabel Schnabel pledged that she and her colleagues will do everything needed to sustain the economic recovery, and warned governments not to undermine that by tightening fiscal policy too soon. "The worst thing that can happen is that the support is ended prematurely. I can assure you that on the monetary-policy side, we'll do everything to avoid that," Schnabel said in an online event on Thursday. "Maybe we should be worried more about fiscal policy," she added, saying that in some countries "there's already a debate ongoing about consolidation of public finances which may actually come a bit too early." (BBG)

EU: Dutch Prime Minister Mark Rutte challenged Viktor Orban to trigger the process of leaving the European Union as a spat over LGBTQ rights deepened the Hungarian premier's isolation in the bloc. During a summit in Brussels on Thursday, Rutte asked why Orban doesn't leave the EU if it doesn't subscribe to its values, according to two diplomats familiar with the comments. Other countries joined the chorus lambasting Orban over a controversial law curtailing public discussion of LGBTQ issues. (BBG)

CORONAVIRUS: Angela Merkel and Emmanuel Macron blasted Greece and other tourism-dependent nations for freely accepting visitors who were inoculated with less effective Chinese and Russian vaccines, signaling the possibility of additional curbs on travel ahead of the peak tourist season. (BBG)

GERMANY: German Chancellor Angela Merkel's CDU/CSU bloc unchanged on 28% in latest infratest dimap poll for ARD television. Greens remain second-strongest force, gaining one percentage point to 21% compared with June 10 poll. SPD gains one point to 15%, AfD unchanged on 12%, FDP down one point to 11%, Linke down one point to 6%. Total of 39% say CDU/CSU should lead next government, up eight points compared with mid-May; SPD and Greens each on 16%, down one point and five points, respectively. Poll of 1,217 voters conducted June 22-23 has margin of error of +/- two to three points. (BBG)

ITALY: The Covid-19 delta variant may account for a quarter of new cases in some parts of Italy, a startlingly rapid rise for the virus mutation, a new study shows. The variant, first detected in India, has sent health care officials across Europe scrambling to respond, with some countries rethinking ambitious plans to reopen their economies. (BBG)

ITALY: Italy's government is working on a package of favorable terms that it could offer UniCredit SpA to take over Banca Monte dei Paschi di Siena SpA, as regulatory pressure builds to work out a survival plan for the troubled lender. The nation's finance ministry may offer additional fiscal benefits and ways to shield the new owner of the Siena-based bank -- the world's oldest -- from legal risks, according to people with knowledge of the matter. Officials may also propose splitting off some parts of the business to make it more attractive to UniCredit Chief Executive Officer Andrea Orcel, who has been cool on the idea, the people said. (BBG)

RATINGS: Sovereign rating reviews of note scheduled for after hours on Friday include:

• Fitch on the Czech Republic (current rating: AA-; Outlook Stable)

U.S.

FED: The U.S. economy is still far from maximum employment and it is not time to change interest rates, New York Federal Reserve Bank President John Williams said Thursday. "Once the recovery is more complete and the economy is in a very good place, then we can take back the low interest rates and get them back to more normal levels," Williams said during a virtual conversation hosted by the College of Staten Island. "It's not the time now because the economy is still far from maximum employment." Williams said the U.S. is still short about 7 million jobs from before the pandemic. He said the higher prices seen recently will not last, with inflation expected to come down to about 2% next year. (RTRS)

FED: While measures of U.S. inflation have surged and businesses are having a hard time finding workers, Federal Reserve Bank of Richmond President Thomas Barkin predicted on Thursday that neither condition will last. True full employment is still "somewhere down the road," Barkin told the Richmond Risk Management Association in a virtual event, with Americans likely to flood back to the workforce in the fall. Inflation, he said, will likely recede in the fourth quarter. "I do believe where we are right now is in a temporary thing," he said. "As we get to the other side of this, as we get into '22, '23, '24, we are just going to have to look and see, where has inflation, and importantly, inflation expectations, where have they settled." (RTRS)

FED: Federal Reserve Bank of Dallas President Robert Kaplan said on Thursday he sees "upside risk" to his forecast for 3.4% inflation this year and 2.4% inflation next year, as supply-demand imbalances may persist longer than anticipated. Whereas initially it was a narrow number of items where prices were rising, it is "broadening out," Kaplan said in a virtual appearance at the Austin Headliners Club, adding that to manage the range of inflation risks ahead, the Fed ought to "sooner rather than later" reduce its support for the economy by trimming its $120 billion a month in asset purchases. (RTRS)

FED: Inflation may be even stronger in coming months than Federal Reserve policymakers currently expect as the U.S. recovery likely gains steam in the fall and a global recovery follows, St. Louis Federal Reserve president James Bullard said on Thursday. That could push the level of prices beyond what is needed to account for recent years of inflation below the Fed's 2% target, and presented a "new risk" that Fed officials will have to consider in coming months. "Inflation may surprise still further to the upside as the reopening process continues, beyond the level necessary to simply make up for past misses to the low side," Bullard said in a presentation prepared for delivery to the Clayton Chamber of Commerce near St. Louis. (RTRS)

FED: The Federal Reserve announced Thursday that the biggest U.S. banks could easily withstand a severe recession, a milestone for the once-beleaguered industry. The Fed, in releasing the results of its annual stress test, said all 23 institutions in the 2021 exam remained "well above" minimum required capital levels during a hypothetical economic downturn. Bank shares popped after the release; the KBW Bank Index rose 1.5% at 5 p.m. That scenario included a "severe global recession" that hits commercial real estate and corporate debt holders and peaks at 10.8% unemployment and a 55% drop in the stock market, the central bank said. While the industry would post $474 billion in losses, loss-cushioning capital would still be more than double the minimum required levels, the Fed said. (CNBC)

ECONOMY: Getting Americans fully back to work, with wages rising, should be the main economic focus of the day, White House economic adviser Heather Boushey said on Thursday, adding that the Biden administration's spending plans would not overheat the economy. "I am first and foremost mostly concerned about getting us to full employment and making sure Americans have good jobs, and that we are delivering on that promise of a strong and stable middle class," Boushey said at a virtual event put on by Politico's Women Rule. "Certainly, out of control inflation gets in the way of that but.. the economic data points in the direction that these (higher prices) are going to be temporary." (RTRS)

ECONOMY: Supply chain disruptions and inflated prices are not abating yet, National Association of Manufacturers CEO Jay Timmons told CNBC on Thursday. "We're seeing rising cost pressures" due to workforce shortages and demand exceeding supply, Timmons said on "Squawk on the Street." "What that's doing is it's causing bottlenecks in a lot of the supply chain for manufacturers who make the finished goods." Timmons, whose Washington-based group is the largest manufacturers trade association in the U.S., said he's hopeful that supply bottlenecks won't be seen in the future as the economy continues to ramp up from the depths of the Covid pandemic. (CNBC)

ECONOMY/FISCAL: Kentucky will offer 15,000 unemployed workers $1,500 bonuses for taking full-time jobs in a back-to-work gambit presented by Governor Andy Beshear on Thursday. The bonuses would be first-come, first-served for workers who get jobs between June 24 and July 30 and complete at least 120 hours of work in their first four weeks on the job. The program will cost the state $22.5 million. (BBG)

FISCAL: U.S. President Joe Biden on Thursday embraced a $1.2 trillion bipartisan Senate deal to renew the nation's roads, bridges and highways and help stimulate the economy -- a major breakthrough on one of his key domestic policy goals. "We have a deal," Biden told reporters, flanked by Democratic and Republican senators who wrote the infrastructure proposal that followed months of White House negotiations with lawmakers. Its $579 billion in new spending includes major investments in the nation's power grid, broadband internet services and passenger and freight rail. But it does not contain other key priorities for Biden and progressive Democrats, such as new spending on home health care and child care, which Biden pitched as "human infrastructure." The Democrats who control Congress by razor-thin margins aim to cover those areas in another spending package that they want to maneuver through the Senate without Republican votes. (RTRS)

FISCAL: Sen. Joe Manchin (D-W.Va.) said on Thursday that it was "inevitable" that Democrats would move forward with a separate, Democrat-only infrastructure package — it was just a question of what the size and scope will be. "Reconciliation is inevitable because basically Republicans I understand on the tax they don't want to undo anything on the 2017 [bill]. For those who didn't vote for 2017, there should be some adjustments. I'm open to that," Manchin told reporters. Manchin's remarks are a huge boon for Democrats because the party needs all 50 of its members to support reconciliation — the budget process that lets them bypass the 60-vote legislative filibuster. (The Hill)

FISCAL: Senate Minority Leader Mitch McConnell (R-Ky.) on Thursday afternoon slammed President Biden for "caving" to his left flank after the president endorsed a bipartisan $579 billion, five-year infrastructure framework and then threatened to veto it if it's not accompanied by a much larger reconciliation package. "Less than two hours after publicly commending our colleagues and actually endorsing the bipartisan agreement, the president took the extraordinary step of threatening to veto it. It was a tale of two press conferences," McConnell said on the floor. McConnell's criticism is the latest sign that the Democratic strategy of trying to pass Biden's infrastructure on two tracks consisting of a scaled-down bipartisan package and a larger partisan reconciliation package will be difficult to pull off. (The Hill)

FISCAL: Senate Finance Committee Chair Ron Wyden, House Ways & Means Committee Chair Richard E. Neal, Treasury Secretary Janet Yellen"spoke about the importance of reforming the tax code to ensure mega-corporations and the wealthiest Americans pay their fair share." They also discussed "overhauling the international tax code to end incentives to ship jobs overseas, and instead reward companies that invest in American workers," according to the readout provided by the lawmakers. "They committed to continuing their work on these issues, and immediately moving to incorporate these reforms in the budget resolution." (BBG)

CORONAVIRUS: President Joe Biden traveled to North Carolina to encourage vaccinations, which are falling short of his goal of getting 70% of U.S. adults a first Covid-19 shot by the July 4 holiday. Biden plans to visit a mobile vaccination unit in Raleigh, North Carolina, and deliver remarks on the importance of getting vaccinated. Across the U.S., 65.7% of adults have received at least one vaccine dose, according to the Centers for Disease Control and Prevention. It will take a few more weeks past Biden's target date for 70% to get at least one shot, Jeffrey Zients, Biden's Covid-19 coordinator, said Tuesday. (BBG)

CORONAVIRUS: The delta variant first identified in India is raging in rural western Colorado, which was largely spared in the early stages of the coronavirus pandemic, a state official said. The proportion of Colorado cases due to the delta variant is estimated to be greater than 50%, Rachel Herlihy, state epidemiologist, said in a statement issued by the state emergency operations center. "We are taking extra precautions and turning to the CDC for additional support to make sure we know how and why the delta variant is spreading," Herlihy said. (BBG)

MARKETS: U.S. investigators who focus on corporate collusion are examining how global banks handled multibillion-dollar trades with Archegos Capital Management that sent stocks into a spiral and burned other shareholders. The Justice Department's antitrust division is handling at least part of the probe into the collapse of Bill Hwang's firm after lenders rushed to liquidate souring positions in March, according to people familiar with the matter. The debacle also erased much of the billionaire owner's fortune and saddled banks with more than $10 billion in losses. (BBG)

EQUITIES: The House Judiciary Committee narrowly advanced a sixth and final piece of legislation that has been dubbed the "break up" bill, on the notion that it ultimately could lead to tech giants shedding assets or splitting in two. The bill, the Ending Platform Monopolies Act, which passed 21-20, would prohibit major tech platforms to sell product lines that they own and control. The bill is aimed at rooting out conflicts of interest that arise when a company like Amazon sells its own lines of products on its platform, giving it the incentive to disadvantage rivals. It also could pose a problem for Google, which ranks videos on its search engine, and also operates YouTube. (Deadline)

EQUITIES: Lina Khan, the new chair of the Federal Trade Commission, on Thursday named three top staff members amid one of the most radical shifts in the agency's history, according to a memo viewed by The Information. Holly Vedova, who was an adviser to FTC commissioner Rohit Chopra, a Democrat, on antitrust issues, is now the acting director of the agency's Bureau of Competition, which oversees all antitrust enforcement at the agency. Sam Levine, another Chopra adviser, is now the acting director of the Bureau of Consumer Protection, which oversees privacy and consumer fraud cases. And Erie Meyer, who is a technical and policy adviser to Chopra, will be the FTC's chief technologist, which provides technical research for enforcement and policy decisions. Meyer will also serve as a policy adviser to Khan. The fact that all three individuals worked for Chopra is significant. Chopra is one of Khan's key allies and lobbied for her to lead the agency because of her expansive view of antitrust enforcement against the likes of Amazon and other big tech companies. (The Information)

OTHER

GLOBAL TRADE: President Joe Biden's picks to be deputies to the U.S. Trade Representative pledged to work with American allies to compete with China and to find solutions to longstanding disputes with Canada over lumber. With China, "We have to be strong, and we have to get our other allies in the region as well to be supportive," Sarah Bianchi, who would oversee the agency's China, Africa and competitiveness portfolios, said at a Senate Finance subcommittee hearing on her nomination on Thursday. "In terms of our competition with China, it's important to be in the game, and be fighting for more open markets for American products," said Jayme White, who would oversee Europe and Western Hemisphere. (BBG)

GLOBAL TRADE: Germany's economy minister said on Thursday his talks in Washington showed a window of opportunity to resolve differences and he expected the United States and European Union could resolve differences over steel and aluminum tariffs by the end of the year. German Economy Minister Peter Altmaier said they also discussed the World Trade Organization waiver of intellectual property rights, but Germany does not see that as the only possible solution. (RTRS)

U.S./CHINA: The Biden administration broadened its campaign against the use of forced labor in China's Xinjiang region on Thursday by imposing penalties on some companies that produce raw materials used to make solar panels. The U.S. Customs and Border Protection said it is immediately barring imports of metallurgical-grade silicon mined by Hoshine Silicon Industry (Shanshan) Co., as well as products made from it, unless the company can prove the material isn't produced with forced labor. The Commerce Department is adding Hoshine and four others involved in silicon production to its entity list, which requires U.S. companies to get a license to sell them products or technology; such licenses are rarely granted. The Labor Department is also adding polysilicon made in China to its list of products made by forced labor. (Dow Jones)

U.S./CHINA/HONG KONG: U.S. President Joe Biden demanded that Beijing end its crackdown on independent journalists in Hong Kong after news outlet Apple Daily ceased publishing this week under pressure from China. "It is a sad day for media freedom in Hong Kong and around the world," Biden said in a statement. "Through arrests, threats, and forcing through a national security law that penalizes free speech, Beijing has insisted on wielding its power to suppress independent media and silence dissenting views." (BBG)

GEOPOLITICS: Japanese Defense Minister Nobuo Kishi said the security of Taiwan was directly linked with that of Japan, as tensions around the island build up and its defenses are increasingly overshadowed by China's military might. The comments from a cabinet minister known for his close ties to Taipei came a week after China sent 28 warplanes near Taiwan, in the latest ratcheting up of military pressure around the democratically ruled island, 110 km (68 miles) from Japan at its nearest point. Beijing claims Taiwan as part of its territory. (BBG)

AUSTRALIA: Australia underlying cash deficit A$125.4b in 11 months to May '21.

SOUTH KOREA: South Korea's Financial Services Commission will allow banks to autonomously decide the size of dividend and interim dividend payout from July 1, Yonhap News reports, citing unidentified people at the financial regulator.. In Jan., FSC advised banks limit dividend payout ratio within 20% to secure buffer under pandemic. (BBG)

CANADA: MNI INTERVIEW: Dollar Casts Shadow Over Bright Canada Exports

• The strength of Canada's dollar is emerging as a major concern for exporters even as they benefit from surging global demand through the pandemic re-opening, the government trade bank's chief economist Peter Hall told MNI Thursday - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

MEXICO: Mexico's central bank wrong-footed economists and boosted the peso by unexpectedly increasing borrowing costs for the first time since late 2018, after inflation remained way above target. In a split decision, Banco de Mexico raised its key rate by a quarter-point to 4.25% in response to a jump in inflation that policy makers had described as transitory. The decision, supported by three of its five-member board, surprised all 23 economists surveyed by Bloomberg, who had expected the bank to hold at 4%. (BBG)

MEXICO: Mexico's health regulator Cofepris issued a modification to the emergency authorization of the Pfizer BioNTech Covid-19 vaccine, allowing its application to those 12 and older. It's the first coronavirus vaccine authorized for use with adolescents, according to a statement from Mexico's health ministry and the regulator. (BBG)

BRAZIL: Brazil's National Monetary Council (CMN) on Thursday set the central bank's 2024 inflation target at 3.00%, another decline from preceding years' goals, highlighting policymakers' determination to keep inflation under control. The CMN is Brazil's highest economic policy body, comprised of Economy Minister Paulo Guedes, central bank chief Roberto Campos Neto and special secretary to the Economy Ministry Bruno Funchal. The Economy Ministry said the 3.00% target for 2024, with a tolerance margin of 1.5 percentage points on either side, will reduce uncertainty and allow households, companies and the government to plan better for the future. "The 0.25 percentage point reduction from the 2023 target is consistent with the high credibility of monetary policy," the Economy Ministry said in a statement, adding that inflation expectations have fallen "substantially" in line with the annual targets. This year's goal was maintained at 3.75%, next year's at 3.50% and the following year's at 3.25%. The Economy Ministry statement said these goals are credible. (RTRS)

BRAZIL: Brazil will receive 3 million Johnson & Johnson vaccines promised by the U.S. on Friday morning, State Department spokeswoman Jalina Porter told reporters. The shipment is part of 88 million doses the U.S. has said it will send abroad, she said. Brazil has recorded more than 18 million cases and some 507,000 deaths, the second-biggest toll after the U.S. (BBG)

BRAZIL: Brazil's Health Ministry doesn't have concerns on the Covaxin vaccine issue and is focused on advancing the immunization program, Health Minister Marcelo Queiroga said during a television program. (BBG)

RUSSIA: European Union leaders rejected an appeal from Germany and France to hold formal talks with Russian President Vladimir Putin, handing Angela Merkel a rare public defeat at what could be her final EU summit as chancellor. The proposal was dropped from the final communique following talks that stretched into the wee hours of Friday, Merkel said as she left the summit venue in Brussels. EU diplomats had earlier said that some countries in Eastern Europe were prepared to veto the plan, such was the strength of their opposition. (BBG)

RUSSIA: U.S. Ambassador to Russia John Sullivan returned to Moscow Thursday, two months after leaving his post amidst escalating tensions between the two nations. Sullivan's return comes just after his attendance at last week's U.S.-Russia summit in Geneva. Russia's ambassador to the United States, Anatoly Antonov, also returned to his post this week, arriving in Washington, D.C., on Monday. (Axios)

IRAN: Washington may need to rethink its approach to Iran if the serious differences between the two countries on resuming compliance with the 2015 nuclear deal cannot be resolved "in the foreseeable future", a senior U.S. official said on Thursday. "We still have serious differences ... over the host of issues, whether it's the nuclear steps that Iran needs to take to come back into compliance, the sanctions relief that the U.S. would be offering or the sequence of steps that both sides would be taking," the official told reporters on a conference call. "This process is not going to be open forever," the official added, speaking on condition of anonymity. "We do have differences and if we can't bridge them in the foreseeable future, I think we are going to have to regroup and figure out how we ... move ahead." (RTRS)

MIDDLE EAST: Roughly 650 U.S. troops are expected to remain in Afghanistan to provide security for diplomats after the main American military force completes its withdrawal, which is set to be largely done in the next two weeks, U.S. officials told The Associated Press on Thursday. (Associated Press)

OIL: Some gasoline stations in at least six U.S. states are experiencing temporary fuel shortages because there aren't enough tanker-truck drivers to deliver the fuel just as summer demand rises, according to an OPIS by IHS Markit report. Fuel-hauling companies that reduced staff during the pandemic are struggling to hire back drivers that found jobs elsewhere, leaving Florida, Iowa, Ohio, Washington, Oregon and Colorado with cases of bagged pumps and outages of regular and premium gasoline in some filling stations, OPIS said Thursday. (BBG)

CHINA

YUAN: Chinese banks' stockpile of foreign-currency deposits has surpassed $1 trillion for the first time, creating an opportunity for Beijing to liberalize the country's capital account. China's resilient economy and strengthening currency have attracted record foreign purchases of bonds and stocks over the past year, while surging demand for goods needed to ride out the pandemic meant exporters brought back more dollars. The stockpile at banks jumped by more than $260 billion in the 12 months through May, the most in any comparable period going back to 2002. The pace of the influx has tested the authorities' tolerance for a strengthening yuan, with the currency now near a five-year high against a basket of its peers. The appreciation is adding urgency for Beijing to reform its foreign-exchange market and ease capital controls, moves that will help reduce dollar liquidity, limit gains in the currency and result in a more liberalized financial market. (BBG)

PBOC: The People's Bank of China signaled its intention to stabilize liquidity and may boost supply to help meet greater demands due to regulatory requirements, the China Securities Journal said citing market participants. The central bank raised its 7-day reverse repo size to CNY30 billion on Thursday, which was the first time since March that the size of such operations had exceeded CNY10 billion, the official securities newspaper said. The backdrop of this injection was that liquidity this month has tightened as money supply was used up, with seven-day weighted average interbank repo rate DR007 hovering above 2.2%, the newspaper said citing economist Qu Qing of Jianghai Securities. The rate returned to below 2% following the PBOC's action and the easing of tax payment demand, the newspaper said. The central bank may continue to push the size of daily reverse repos over CNY10 billion should funding tightens again through the end of June, the newspaper said citing analyst Wang Qing of Golden Credit Rating. (MNI)

FISCAL: China may increase fiscal policy support in the second half to meet its budget deficit goal, and accelerate local bond issuances to boost infrastructure investment, the Securities Times reported citing analysts. Fiscal spending was behind schedule as infrastructure investments in the first five months fell below average, the newspaper said citing Wu Chaoming, chief economist of Chasing Securities. Bond issuances also have been limited as local governments tried to limit risks from their financing vehicles, the newspaper said. The Finance Ministry may arrange some local government special bonds to help them replace hidden debts, the newspaper said citing analyst Tao Jin with Suning Institute of Finance. (MNI)

PROPERTY: Authorities in more big Chinese cities may toughen mortgage reviews and increase waiting periods for granting loan approvals, particularly for pre-owned homes, following restrictive policies that have slowed transactions and narrowed price gains, the 21st Century Business Herald reported. Buyers for pre-owned homes may need to wait over three months to get loans in Chongqing and Wuhan, the newspaper said. Banks under pressure to control mortgage lending will face mid-year regulatory reviews, and regulations attempting to prevent an overheated housing market will be strictly implemented, the newspaper said. (MNI)

OVERNIGHT DATA

JAPAN JUN TOKYO CPI 0.0% Y/Y; MEDIAN -0.3%; MAY -0.4%
JAPAN JUN TOKYO CORE CPI 0.0% Y/Y; MEDIAN -0.1%; MAY -0.2%
JAPAN JUN TOKYO CORE-CORE CPI 0.0% Y/Y; MEDIAN -0.1%; MAY -0.1%

NEW ZEALAND MAY TRADE BALANCE +NZ$469MN; APR +NZ$414MN
NEW ZEALAND MAY TRADE BALANCE 12 MTH YTD -NZ$62MN; APR +NZ$764MN

SOUTH KOREA JUL BUSINESS SURVEY M'FING 99; JUN 97
SOUTH KOREA JUL BUSINESS SURVEY NON-M'FING 82; JUN 81

UK JUN GFK CONSUMER CONFIDENCE -9; MEDIAN -7; MAY -9

CHINA MARKETS

PBOC INJECTS NET CNY20BN VIA OMOS FRIDAY

The People's Bank of China (PBOC) injected CNY30 billion via 7-day reverse repos with the rate unchanged at 2.2% on Friday. The operation resulted in a net injection of CNY20 billion given the maturity of CNY10 billion reverse repos today, according to Wind Information.

• The operation aims to keep liquidity stable at half-year end, the PBOC said on its website.
• The 7-day weighted average interbank repo rate for depository institutions (DR007) decreased to 2.2008% at 09:29 am local time from the close of 2.2559% on Thursday.
• The CFETS-NEX money-market sentiment index closed at 40 on Thursday vs 36 on Wednesday.

PBOC SETS YUAN CENTRAL PARITY AT 6.4744 FRI VS 6.4824

People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.4744 on Friday, compared with the 6.4824 set on Thursday.

MARKETS