EUR: EURSEK new all time record high

CNH and the Hang Seng index more than unwind initial, modest gains derived from the BBG sources piece noting that “Chinese authorities asked the nation’s biggest banks to lower their deposit rates for at least the second time in less than a year, marking an escalated effort to boost the world’s second-largest economy.”

• The piece went on to suggest that “state-owned lenders were last week advised to cut rates on a range of products, including on demand deposits by 5bp and three-year and five-year time deposits by at least 10bp.” The moves are not mandatory, per the report.
• While the move would provide some initial cushion for bank NIMs (which authorities are acutely attuned to), it would likely result in lower lending rates, eventually (eroding some, if not all, of the NIM benefits). This dynamic is probably factoring into the weakening in CNH (USD/CNH topped out just in front of YtD highs), as the cross-market interest rate differential outlook is re-assessed.
• Also note that some initial reactions to the headlines have suggested that the touted move could be a result of the authorities getting an early look at May’s credit data (due to hit at some point in the next ~10 days). This can’t be seen as a given, with state-run media outlets already flagging a recovery in credit deployment in May (albeit with a Y/Y decline still touted). However, in the details, a touted lack of recovery in household loans may have contributed to the deposit rate cut request.