PBOC Aug 1Y LPR Seen Unlikely to Drop but Momentum Builds: Times

The PBOC is likely to keep the benchmark LPR unchanged on the 20th of this month, but lenders may be more incentivised to quote lower rates as their cost of capital declines, the Securities Times said citing Wang Qing of Golden Credit Ratings, after the central bank kept the MLF rate at 2.95% on Monday. The central bank exceeded market expectations yesterday when it renewed CNY600 billion of the CNY700 billion maturing MLF. The backwardation between market rates and the 2.95% MLF rate rose to 30 bps on Aug. 13, limiting banks' demand for the MLF operation, the newspaper said. Lenders stood to save CNY13 billion in capital costs when the PBOC cut RRRs in July and helped them reduce costs of deposit in June, the newspaper said.