Free Trial
STIR FUTURES

Fed Rate Expectations Bounce But 2023 Still Squeezed

US EURODLR OPTIONS

BLOCK, Second Put Condor, Narrower Range

GBPUSD TECHS

Key Short-Term Support Intact - For Now

US

FED Reverse Repo Operation: New Record High

US EURODLR OPTIONS

BLOCK, Dec'22 Broken Put Condor

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access

SocGen: Much More Is Needed Than The PBoC’s Small And Overdue Rate Cuts

CHINA

In the wake of yesterday’s PBoC easing Societe Generale note that “the timing is in some sense both later and earlier than we thought. Later, because the economy has been in need of such a move for several months now. Earlier, because we thought the PBoC would first want to be more certain that dollar strength had peaked. If the dollar stops rising from here, we can see 1-2 more such cuts by the year-end.”

  • “The rate cuts can help lower lending rates further but far from enough to counter the immense downward pressure from the zero-COVID policy and housing woes. Yet, it is a sign that policymakers still care about growth. So, the thesis of "they will do more" is still valid. However, the likelihood seems to be that the policy response will remain lagged and incremental. The message from July’s politburo meeting suggested as much. There was no mention of topping up government bond issuance quotas, either at central or local levels. The only option proposed was “to support local governments to make full and good use of the special debt cap,” which means a maximum CNY1.5tn extra LGB issuance this year.”
  • “Quite clearly, Chinese policymakers have been much more reluctant in providing policy easing to support growth in this cycle than before. One possible explanation is that they understand the unsustainable nature of any credit/investment stimulus, in light of the existing debt problem. But, as we argued in our housing note, a proper debt restructuring programme could help and is the better solution in our view, even though it is much more difficult to execute. Another explanation is that many officials are waiting to see the outcome of the 20th Communist Party Congress, which is due to take place some time between mid-October and mid-November. If so, in the best scenario, we may get proper stimulus - or better still, a debt restructuring package - but only in late November, or later.”
325 words

To read the full story

Why Subscribe to

MarketNews.com

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.

In the wake of yesterday’s PBoC easing Societe Generale note that “the timing is in some sense both later and earlier than we thought. Later, because the economy has been in need of such a move for several months now. Earlier, because we thought the PBoC would first want to be more certain that dollar strength had peaked. If the dollar stops rising from here, we can see 1-2 more such cuts by the year-end.”

  • “The rate cuts can help lower lending rates further but far from enough to counter the immense downward pressure from the zero-COVID policy and housing woes. Yet, it is a sign that policymakers still care about growth. So, the thesis of "they will do more" is still valid. However, the likelihood seems to be that the policy response will remain lagged and incremental. The message from July’s politburo meeting suggested as much. There was no mention of topping up government bond issuance quotas, either at central or local levels. The only option proposed was “to support local governments to make full and good use of the special debt cap,” which means a maximum CNY1.5tn extra LGB issuance this year.”
  • “Quite clearly, Chinese policymakers have been much more reluctant in providing policy easing to support growth in this cycle than before. One possible explanation is that they understand the unsustainable nature of any credit/investment stimulus, in light of the existing debt problem. But, as we argued in our housing note, a proper debt restructuring programme could help and is the better solution in our view, even though it is much more difficult to execute. Another explanation is that many officials are waiting to see the outcome of the 20th Communist Party Congress, which is due to take place some time between mid-October and mid-November. If so, in the best scenario, we may get proper stimulus - or better still, a debt restructuring package - but only in late November, or later.”