CHINA: PBOC Injects CNY231.5bn via OMO

The first 12 trading days of May saw a collective CNY400bn of withdrawals all front loaded in the month, followed by successive days of maturities meeting injections.  That has ended in recent days with a return to liquidity injections - another of which occurred today - and the gradual rise in Repo rates.  

• The PBOC issued CNY177.6bn of 7-day reverse repo at 1.4% during this morning's operations.
• Total maturities today CNY50bn
• Net Liquidity injection CNY127.6bn
• The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
• The CFETS Daily Pledged Repo DR007 Wgtd Rate is at 1.3706%, from prior close of 1.3752%.
• The China overnight interbank repo rate is at 1.3035%, from the prior close of 1.3054%.
• The China 7-day interbank repo rate is at 1.3680%, from the prior close of 1.3708%.

Westpac’s leading index rose 0.04% m/m in April but the 6-month measure was negative for the second straight month signalling slightly below trend growth in H2 2026. The weakness has been mainly driven by the sharp drop in consumer sentiment following the jump in fuel prices but financial market components also contributed. The risk is that the longer the Iran War blocks fuel shipments, the weaker the growth outlook will be especially if accompanied by further RBA tightening. 

• The 6-month rate printed at -0.17% annualised after -0.11% in March, which is only moderately negative compared with the -1.1% in May 2023 (Q4 2023 GDP fell 0.1% q/q). Westpac projects a “material” growth slowdown but not as sharp as other “major shocks”.
• It also expects the RBA to be on hold in June as the Board monitors data and events following 75bp of tightening in 2026.
• Westpac notes that the detraction from the index from softer equities, AUD commodity prices and narrower yield spread have been offset by stronger hours worked and US IP. 

Australia Westpac leading index vs GDP 2q/2q% annualised

Source: MNI - Market News/LSEG

• CHINA PBOC CONDUCTS CNY177.6 BLN VIA 7-DAY REVERSE REPO WEDS