CHINA: Stimulatory Measures Announced by PBOC
May-07 02:00
- Markets have agonized for some time as to when there would be new measures announced by authorities to support the Chinese economy in a bid to ensure the 5% GDP growth target is achievable in the face of 145% tariffs from the US.
- The Central Bank, the People’s Bank of China, announced today a cut to the seven-day reverse repurchase rate to 1.4% from 1.5%. The reverse repo is the preferred measure for managing interbank liquidity by the PBOC. The PBOC conducts daily operations known as open market operations. The change will come into effect from tomorrow.
- The PBOC also announced a reduction in the amount banks must own in reserve (known as the RRR) by 0.5% which is expected to see CNY1tn of long term capital released into the market.
- The PBOC will set up a CNY500bn relending tool for consumption and elderly care with more details to follow.
- The PBOC will increase its relending fund for technology companies by CNY300bn to support innovation.
- The PBOC will increase its relending fund by CNY300bn for agriculture to support the sector.
- The measures could see upward pressure on yields as banks tend to put excess liquidity held for reserves into the bond market. The PBOC had halted a bond buying program earlier this year as yields ratcheted lower and any upward movement in yields could see that the program restarted.
- The regional governments and central governments have enormous issuance requirements this year. The first test post this announcement will come on Friday when the central government issues CNY71bn of 2055 and CNY170bn of 2026 bonds
- The CGB market and bond futures have reacted very little to the news with CGB 10yr unchanged at 1.62% and bond futures marginally higher. The news of the RRR cut is not a sell order for banks so no mass liquidation of bonds is expected. However over time it is likely to see selling pressure on yields, something the PBOC will likely seek to manage.
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ASIA STOCKS: Korea’s Outflows Intensify.
Apr-07 01:49
Global Investors continue to withdraw from Korea with another day of significant outflow alongside Thailand.
- South Korea: Recorded outflows of -$1,283m Friday, bringing the 5-day total to -$4,436m. 2025 to date flows are -$8,530, m. The 5-day average is -$887m, the 20-day average is -$225m and the 100-day average of -$132m.
- Taiwan: Had inflows of +$19m as of the 2nd, with total outflows of -$3,124m over the past 5 days. YTD flows are negative at -$18,247. The 5-day average is -$625m, the 20-day average of -$505m and the 100-day average of -$256m.
- India: Had outflows of -$345m as of 3rd, with total inflows of $24m over the past 5 days. YTD flows are negative -$14,006m. The 5-day average is +$5m, the 20-day average of +$15m and the 100-day average of -$143m.
- Indonesia: Had inflows of $38m as of the 27/3, with total inflows of +$54m over the prior five days. YTD flows are negative -$1,830m. The 5-day average is +$11m, the 20-day average -$33m and the 100-day average -$34m
- Thailand: Recorded outflows of -$185m Friday, totaling -$202m over the past 5 days. YTD flows are negative at -$1,331m. The 5-day average is -$40m, the 20-day average of -$34m the 100-day average of -$19m.
- Malaysia: Recorded outflows of -$74m Friday, totaling -$195m over the past 5 days. YTD flows are negative at -$2,338m. The 5-day average is -$39m, the 20-day average of -$54m the 100-day average of -$37m.
- Philippines: Saw outflows of -$13m Friday, with net outflows of -$14m over the past 5 days. YTD flows are negative at -$229m. The 5-day average is -$3m, the 20-day average of +$1m the 100-day average of -$6m.
CHINA: Central Bank Drains Liquidity via OMO.
Apr-07 01:33
- The PBOC issued CNY93.5b of 7-day reverse repo at 1.5% during this morning’s operations.
- Today’s maturities CNY245.2bn
- Net liquidity withdrawal CNY151.7bn.
- The PBOC monitors and maintains liquidity in the interbank market through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted Average is at 1.53%, from Thursday’s close of 1.69%
- China’s overnight interbank repo rate is 1.79%, from Thursday’s close of 1.70%.
- China’s 7-day interbank repo rate is 1.70%, unchanged.
US TSYS: Cash Bonds Sharply Richer But Off Bests
Apr-07 01:29
TYM5 is stronger at 113-18, +16+ from closing levels in today's Asia-Pac session, but well off today’s high of 114-10.
- According to MNI's technicals team, focus for TYM5 is on technical resistance at 114-16 (2.000 proj of the Jan 13 - Feb 7 - Feb 12 price swing) after having breached round number resistance (114-03.5 high) on Friday.
- Cash US tsys are 4-14bps richer in Asia-Pac session after Friday’s solid gains.
- S&P 500 futures have pared their decline to less than 3% in today's Asia-Pac session from -5.4% earlier.
- Nevertheless, global markets realise that President Trump's tariff policies are not just a US problem and that a US recession has serious implications for global growth. A raft of Asian economies have reached out to the US looking to remove either levies on US imports or open trade talks. However, China unveiled a 34% duty on all US imports. This remains front centre in the minds of market participants as they attempt to digest the implications of this in the Asian session.
- On Friday, March jobs printed higher-than-expected but this gain was tempered slightly by a down-revision to the prior. The latest profile saw 228k after two weak months (111k Jan, 117k Feb) which in turn followed two booming months (261k Nov, 323k Dec).
