Repo Rates Higher

The PBOC matched maturities with injections today after draining CNY 10bn yesterday. Repo rates are higher again after trending lower through the session yesterday; the overnight repo rate is 46 bps higher at 2.1105% after touching 2.195% yesterday, the seven day repo rate is up 3bps at 2.1804% having been as high as 2.24% today. Futures are higher, retracing some of yesterday's decline.

• Corporate bond spreads have narrowed to the lowest level in two months as Huarong has reached funding agreements with state owned banks to guarantee its obligations through to the end of August when the company should have completed its 2020 accounts.
• The PBOC is likely to keep the Loan Prime Rate (LPR) unchanged when it issues monthly guidance on May 20, the Securities Daily reported citing analysts. The central bank on Monday rolled over the maturing medium-term lending facilities (MLF) with the amount and the rate unchanged, indicating it intends to keep policies stable and guide interbank rates around policy rates, the newspaper said. Banks also lack the motivation to increase May LPR quotes given marginal changes in banks' capital costs, the newspaper said citing Wang Qing, chief analyst at Golden Credit Rating. The one-year LPR has been unchanged for the 12th month at 3.85%, with the five-year LPR also unchanged at 4.65%.