Repo Rates Steady

The PBOC matched maturities with injections again today, the twenty second straight session of matching maturities, while the bank hasn't injected funds since February 25. Overnight repo rate is steady, last up 3.5bps at 1.805%, 7-day repo rate is up 7.7bps at 1.8772%.

• China's Securities Depository and Clearing Corp has confirmed that lower rated corporate bonds insured by hedging tools can be used as collateral for repos. Notes with a rating of AA+ and above will be permissible, previously, corporate bonds wouldn't qualify for the repo business unless they had a bond rating of AAA and an issuer rating of AA or above. According to a statement from the CSDCC the move is aimed at further supporting fundraising by the country's small- and medium-sized firms, private companies and local state-run enterprises. It's also intended to regulate the development of repo operations with bonds carrying credit protection, and encourage the use of instruments such as CDS.
• Elsewhere, a piece emanating from a standalone headline yesterday is doing the rounds, the PBOC is said to have asked major lenders to curtail loan growth for the rest of this year after a surge in the first two months stoked bubble risks. Following a meeting in late March the PBOC had asked representatives of 24 major banks to keep loan growth stable and reasonable. In 2020, banks doled out a record CNY 19.6tn of credit. The potential for bubbles is evident not just to Chinese officials; "China faces rising vulnerabilities as it emerges from the pandemic," the IMF said in its global financial stability report Tuesday, after lifting growth forecasts for China and the rest of the world.
• Markets await the results of 3- & 7-year bond auctions.