People’s Bank of China offers cheap loans of 267b yuan

Business | 24 Apr 2019 3:38 pm

The People’s Bank of China offered 267.4 billion yuan of targeted medium-term loans today, a step that funnels money to some lenders while avoiding broad easing, Bloomberg reports.

The one-year funds carry an interest rate of 3.15 percent, the same as the PBoC’s debut TMLF operation in January and less than the 3.3 percent it charges on regular MLF financing.

The injection signals a calibrated approach to liquidity management, with the PBoC trying to keep money moving through the financial system while holding back market expectations for stronger easing.

The funding is the PBoC’s second use of the targeted version of its Medium-term Lending Facility. To get the cheaper financing, banks must pledge to lend more to small and private firms.

Bond yields held near recent highs after the operation, with 10-year sovereign debt yielding 3.42 percent, the most since November. The cost of one-year interest-rate swaps climbed by 1 basis point to 2.94 percent, close to the highest since July; this means traders are pricing in tighter liquidity in the future.

The TMLF offering is “lower profile, more targeted" than cuts to reserve-requirement ratios, which could create bubbles in the stock market, said Lu Ting, chief China economist at Nomura International in Hong Kong. “The chance of an RRR cut in the coming month is very small.

“The PBoC’s tone has changed, which means the pace and scale of easing will moderate. The central bank will stay in a wait and see mode.''

Still, "there’s a chance we may see RRR cuts in the second half as a large amount of MLF loans will mature."


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