Monthly LPR Fixings Set To Remain Unchanged

The latest round of monthly LPR fixings submitted to the PBoC will cross later today. No is change expected in either the 1- or 5-Year benchmarks, per the BBG survey medians, albeit with an outside chance of a cut to the 5-Year fixing to support the property market noted.

• The rate applied to the PBoC’s 1-Year MLF operations was left unchanged earlier this week. Movement in that interest rate often, but not always, acts as a pre-cursor to moves in the LPR, but policymaker focus on support for the property sector introduces the risk of a move in the 5-Year fixing.
• 11 of the 14 surveyed by BBG look for the 1-Year fixing to be left unchanged at 3.65%, with 2 looking for a 10bp cut and 1 looking for a 15bp cut.
• 6 of the 11 surveyed by BBG look for no movement in the 5-Year LPR fixing, which currently stands at 4.30%, while 1 looks for a 5bp cut, 3 look for a 10bp cut and 1 looks for 15bp cut.
• A piece that our policy team published yesterday looked into the short-term outlook for PBoC policy in more detail, noting that “China's reference lending rates are expected to remain unchanged in January as confidence about an economic recovery grows after the easing of Covid controls, and as measures to expand credit and shore up the property sector gain traction,” citing analysts and policy advisors.