For April the 1 and 5 year remain unchanged
- 1 year at 3.70%
- 5 year at 4.60%
- In March the one-year loan prime rate was held at 3.70% while the five-year remained at 4.60%
more to come
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Background to the setting today:
Last week the PBOC rolled over a medium-term lending facility (MLF) at an unchanged rate.
This lowered the expectation for any cut to LPRs today. For example:
But, Reuters polling showed otherwise, earlier post in this is here
- 11, or 39% of all respondents, predicted a marginal cut of 5 basis points (bps) to both the one-year loan prime rate (LPR) and the five-year rate
- Another six participants also expect a reduction to either rates within a range of 5 to 10 bps
- The remaining 11 respondents expected both rates to remain unchanged this month.
The Bank, though, has made a small cut to the reserve requirement ratio (RRR):
- 25-basis-point cut to banks' reserve requirement ratiowill release around 530 bn yuan in long-term liquidity
Liquidity
Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange market – it is the world’s most liquid market, since numerous banks, hedge funds and individual traders partake in the buying and selling of vast cumulative amounts currencies every single day. In fact, over $5 trillion is exchanged daily, as mentioned by the Bank of International Settlements. If a trader wants to go long on the currency pair EUR/USD, they will have no trouble in finding traders wanting to go the opposite way, due to such ample liquidity. The EUR/USD is the world’s most liquid trading instrument, in any market. It is extremely easily bought or sold, with an immense quantity of trading activity for the pair. Liquidity reflects the quantity and the frequency of the asset that’s being traded, i.e. the more an asset is traded, the more liquid that asset is, making it virtually effortless for the asset to be bought and sold.Likewise, the less an asset is traded, generally the less liquid the asset is, making it more difficult for that asset to be bought or sold. It goes without saying that liquidity is one of the key attributes a trader looks for, when deciding on whether to pursue trading an instrument, since it tells the trader how stable a market is despite masses of trades being undertaken. This is exactly why the forex market is so enticing, since its liquid environment allows massive trading volumes to occur without much effect on the currency pairs’ exchange rates.
Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange market – it is the world’s most liquid market, since numerous banks, hedge funds and individual traders partake in the buying and selling of vast cumulative amounts currencies every single day. In fact, over $5 trillion is exchanged daily, as mentioned by the Bank of International Settlements. If a trader wants to go long on the currency pair EUR/USD, they will have no trouble in finding traders wanting to go the opposite way, due to such ample liquidity. The EUR/USD is the world’s most liquid trading instrument, in any market. It is extremely easily bought or sold, with an immense quantity of trading activity for the pair. Liquidity reflects the quantity and the frequency of the asset that’s being traded, i.e. the more an asset is traded, the more liquid that asset is, making it virtually effortless for the asset to be bought and sold.Likewise, the less an asset is traded, generally the less liquid the asset is, making it more difficult for that asset to be bought or sold. It goes without saying that liquidity is one of the key attributes a trader looks for, when deciding on whether to pursue trading an instrument, since it tells the trader how stable a market is despite masses of trades being undertaken. This is exactly why the forex market is so enticing, since its liquid environment allows massive trading volumes to occur without much effect on the currency pairs’ exchange rates.
Read this Term.
- will take effect April 25
- a 25bp cut is smaller than the usual 50 or 100 bps cut.
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