Free Trial
OIL PRODUCTS

VLCC, Suezmax CPP Utilisation

EUROZONE T-BILL ISSUANCE

W/C July 4, 2022 - Upcoming

STIR

Effective Fed Funds Rate

NATURAL GAS

Germany Prepares For Nord Stream 1 Maintenance

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

Will The Loan Prime Rates Fix Lower Today?

CHINA

A quick look at the BBG survey covering today’s PBoC loan prime rate (LPR) fixings points to a 5bp reduction in both the 1- & 5-Year rates, to 3.65% & 4.55%, respectively. 9 of the 23 surveyed by BBG look for such a move in the 1-Year fixing, with 6 looking for a 10bp cut and the remaining 8 looking for no change. When it comes to the 5-Year fixing it seems to be a closer call, with 9 looking for no change (the modal outcome of the survey), 8 looking for a 5bp cut and 2 looking for a 10bp cut.

  • A reminder that the PBoC left the rate applied to its 1-Year MLF unchanged earlier in the week, which seemed to disappoint some (even though the median view moved to no change in rates applied to using the MLF after last week’s hotter than expected inflation data), alongside a basic rollover of the funds maturing, making it a net neutral liquidity event.
  • While a move in the MLF is deemed to be a precursor for the move in the LPR fixings, it is not a prerequisite.
  • Several interest rates are dealing well below LPR levels e.g. the weighted average rate for new deposits fell 10bp at the end of April, to 2.37%, according to the PBoC, and the yield on AAA-rated negotiable certificate of deposits (NCD) has fallen to ~2.30%.
  • Elsewhere, the weighted DR007 rate has pulled comfortably below the 7-day reverse repo rate, with the 20-DMA of the former running at ~1.65% vs. the latter, which stands at 2.10%.
  • A reminder that April’s credit data provided a notable downside surprise, with the PBoC flagging the well-documented COVID lockdowns and rising input costs as hinderances to credit demand. Geopolitical fears may have also fed into the lack of demand for credit.
  • The PBoC has reaffirmed its commitment to providing ample liquidity, with some analysts pointing to a narrowing window for policy action, given the U.S. Federal Reserve’s “expeditious” tightening cycle and the recent uptick in Chinese inflation. On the other side of the argument, some point to ever more limited transmission of lower policy rates during times when COVID lockdowns are in play & at current interest rate levels, while calling for more easing on the fiscal side.

Fig. 1: China DR007 Rate Vs. 7-Day Reverse Repo Rate (%)

Keep reading...Show less
405 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.

A quick look at the BBG survey covering today’s PBoC loan prime rate (LPR) fixings points to a 5bp reduction in both the 1- & 5-Year rates, to 3.65% & 4.55%, respectively. 9 of the 23 surveyed by BBG look for such a move in the 1-Year fixing, with 6 looking for a 10bp cut and the remaining 8 looking for no change. When it comes to the 5-Year fixing it seems to be a closer call, with 9 looking for no change (the modal outcome of the survey), 8 looking for a 5bp cut and 2 looking for a 10bp cut.

  • A reminder that the PBoC left the rate applied to its 1-Year MLF unchanged earlier in the week, which seemed to disappoint some (even though the median view moved to no change in rates applied to using the MLF after last week’s hotter than expected inflation data), alongside a basic rollover of the funds maturing, making it a net neutral liquidity event.
  • While a move in the MLF is deemed to be a precursor for the move in the LPR fixings, it is not a prerequisite.
  • Several interest rates are dealing well below LPR levels e.g. the weighted average rate for new deposits fell 10bp at the end of April, to 2.37%, according to the PBoC, and the yield on AAA-rated negotiable certificate of deposits (NCD) has fallen to ~2.30%.
  • Elsewhere, the weighted DR007 rate has pulled comfortably below the 7-day reverse repo rate, with the 20-DMA of the former running at ~1.65% vs. the latter, which stands at 2.10%.
  • A reminder that April’s credit data provided a notable downside surprise, with the PBoC flagging the well-documented COVID lockdowns and rising input costs as hinderances to credit demand. Geopolitical fears may have also fed into the lack of demand for credit.
  • The PBoC has reaffirmed its commitment to providing ample liquidity, with some analysts pointing to a narrowing window for policy action, given the U.S. Federal Reserve’s “expeditious” tightening cycle and the recent uptick in Chinese inflation. On the other side of the argument, some point to ever more limited transmission of lower policy rates during times when COVID lockdowns are in play & at current interest rate levels, while calling for more easing on the fiscal side.

Fig. 1: China DR007 Rate Vs. 7-Day Reverse Repo Rate (%)

Keep reading...Show less