Bloomberg article on the impact today of the People’s Bank of China (PBOC) adding 500 billion yuan ($81.4 billion) to the financial system:
- One-year interest-rate swaps, the fixed payment to receive the floating seven-day repurchase rate, declined as much as seven basis points to a three-month low of 3.46 percent in Shanghai, data compiled by Bloomberg show
- The five-year bond yield slid the most in three months, the yuan gained for the first time in five days and the Hang Seng China Enterprise Index of shares was set for its biggest advance in two weeks.
- “The SLF will iron out the short-term bumps in liquidity,” Hao Hong, a Hong Kong-based strategist at Bocom International Holdings Co., said in a phone interview. “There is a need for liquidity injections because there are IPOs coming up that can tie up 800 billion to 1 trillion yuan at a time. Plus you have cash demand for the Golden Week holiday and quarter-end demand from banks to meet regulatory requirements.”
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Meanwhile, via FastFT (gated)
- The PBoC is said to be providing funds through three-month standing lending facility operations (SLFs), confirming “that the authorities will continue to provide targeted stimulus where necessary,” according to Barclays analysts.
- “We think the latest SLF is mainly aimed at providing liquidity to pre-empt potential liquidity shortages in the banking system in the coming weeks,” they added.
And
- Analysts at Goldman Sachs said the move – which hasn’t been confirmed by the PBoC – would be “roughly the same as a 50 bps cut to RRR [required reserve ratio] for the whole banking system on a static basis.”
