Thoughts On The LPR Fixings

First reaction when it comes to the lower 5-Year LPR fixing is that the linkages with mortgage rates could have facilitated lower guidance on the part of the PBoC (a reminder that the LPR fixing is a result of submissions from a panel of Chinese banks). There have been various instances of localised easing of property markets in several Chinese cities in recent weeks, with a lower 5-Year LPR fixing seen as another supportive factor when it comes to the faltering domestic housing market (albeit on a broader basis).

• The unchanged 1-Year LPR fixing comes after the interest rate applied to access the PBoC’s 1-Year MLF was left unchanged earlier this week. We noted that several market interest rates are already trading comfortably below the 1-Year LPR in our preview of today’s fixings, perhaps lowering the need to move the 1-Year LPR. Questions re: the monetary policy transmission at current low rate levels and amid the COVID lockdown, with worry re: geopolitical risks and low demand for credit in April, may also have played into the flat fixing.