Citic Securities says the PBOC will look to "plug the liquidity hole" in April
The firm notes that China will likely use a targeted reduction in RRR to inject liquidity as a batch of medium-term loans previously offered by the PBOC is set to mature during the month. Adding that the Chinese central bank will also lower funding costs by using the targeted medium-term lending facility.
For some context, cash supply in China looks set to tighten in the coming weeks as there will be about ¥367 billion of MLFs set to mature.
It's not uncommon for the PBOC to pursue this measure especially in times when they perceive liquidity to be a bit stricken, as we saw earlier this year - where they hinted that the 100 bps cut at the time was "not a big stimulus" i.e. expect more to come.
In case you're wondering, China cut its RRR by 250 bps throughout 2018 in efforts to keep the economy growing steadily. Prior to that, the last cut was only seen in 2016.
