PBOC Rolls Over CNY 100bn At MLF; Net Drain CNY 300bn

The PBOC conducted CNY 100bn of 1-Year MLF's at an unchanged 2.95%, equating to a net drain of CNY 300bn. Given that last week's 0.5ppt RRR cut is expected to result in an additional CNY 1tn into the system it was expected the PBOC would allow all of the MLF funds to roll off. There were some reports mentioned earlier that the PBOC had gauged demand for MLF from commercial banks, and at this MLF operation have cited demand from tax payments. There is still some speculation that the PBOC could cut the LPR rates this month given that the RRR cut will lead to lower funding costs for banks and enable them to charge less on loans.

• On the OMO front the PBOC matched injections with maturities, repo rates slightly higher and rising above yesterday's range. Overnight repo rate is up 0.5bps at 2.951%, 7-day repo rate up 2bps at 2.20%, exactly at the PBOC's prevailing rate.
• Markets will now watch the monthly data dump where figures are expected to confirm a slowdown in economic activity and will be parsed for clues as to the PBOC's intentions going forwards.