HALISTER1: PBOC’s 28-Day Reverse Repos Signal Neutral Policy Stance: CICC

PBOC’s 28-Day Reverse Repos Signal Neutral Policy Stance: CICC

(Bloomberg) -- PBOC’s resumption of 28-day reverse repos mainly aims at smoothing funding demand across Mid-Autumn holidays on Sept. 15-17 and National Day holidays on Oct. 1-7, CICC bond analysts led by Chen Jianheng write in note today.
  • Given capital outflows continue, longer-term liquidity injection could replace a RRR cut to some extent; it would also prompt banks to lend out longer-term funds at higher costs and help to prevent high leverage in bond market
  • 28-day reverse repos are unlikely to boost avg funding cost for banks because current deposit, a major funding source for banks, has increased this year: CICC: says avg funding cost for policy banks and large state-owned banks is lower than 2%
  • Related story: PBOC sells 60b yuan of 28-day reverse repos at 2.55%, down from 2.6% in Feb.
  • Yield of 10-yr govt bond drops 3 bps to 2.770%
  • 1-year IRS steady at 2.5100%; 5-year IRS down 1 bp at 2.7800%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
PBCZ CH (People's Bank Of China)

People
Chen Jianheng (China International Capital Corp Ltd)

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