VIEW: ANZ note that "China's bond supply......>

CHINA: VIEW: ANZ note that "China's bond supply peak is coming, with CNY1trn of

special treasury bonds to be issued within the next six weeks. In addition,

another CNY4trn of net supply of government bonds is scheduled for issuance in

the second half of 2020. The total supply will be 2.4 times compared with the

same period last year. The remarkable supply risk will test market liquidity via

the increase/decrease of fiscal deposits. We believe fiscal funds will be raised

consistently on a weekly basis but fiscal spending will remain concentrated at

quarter-ends. As a result, the excess reserve ratio could drop to 1.7% by end of

H1. There is no specific liquidity tool that the PBoC uses to offset market

fluctuations caused by government bond issuances. Our core view remains that the

RRR cut is the best way to increase the excess reserves. We forecast the PBoC

will cut the required reserve ratio (RRR) by 100bps for major banks in H2. This

will release CNY1trn into the banking system. Going forward, OMO/MLF will also

be used intermittently."