Repo Rates Remain Elevated

The PBOC matched injections with maturities again, repo rates holding their ground currently but remain elevated. The 7-day repo rate is up 2bps at 2.27%, above the PBOC's 2.20% rate. There was another piece in the China Securities Journal that said the PBOC may inject more liquidity at an appropriate time, very similar in tone to a piece in CSJ last week.

• The PBOC may increase liquidity injection to offset a possible gap resulting from government bond issuances, companies buying forex for paying dividends and quarter-end regulatory compliances, the China Securities Journal reported citing analysts. The planned issuance of China Government Bonds and local government bonds this week exceeded CNY470 billion, a record high this year, while Chinese companies listed overseas will be in peak season for paying dividends, the newspaper said citing Xie Yaxuan, the chief analyst at China Merchants Securities. The PBOC may release more reverse repos or roll over the maturing MLFs with excess added, the newspaper said citing Song Xuetao, chief analyst of Tianfeng Securities.
• In terms of debt issuance a Nomura research note estimated that only 26% of net financing has been completed in the first five months of 2021, given that the government usually prefers local authorities to complete issuance by the end of October the timeline for issuance is likely to be accelerated.
• A piece in China Financial News said the PBOC had adopted a prudent stance on liquidity and aimed to keep policy steady. The piece cited Citic Securities analyst Ming Ming saying that liquidity was still ample, though excess reserves at banks has dropped.