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18 Mar 2015
China might see policy and RRR cuts soon - RBS
FXStreet (Barcelona) - Gao Qi, Trading Strategist at RBS, notes that PBoC is likely to maintain proper liquidity while stabilizing the yuan, anticipating China to see a policy rate and RRR cut soon.
Key Quotes
“The PBoC trimmed auction yield in 7-day reverse repos in its routine open market operations (OMOs) by 10 bp to 3.65% yesterday in response to climbing money market rates post the February rate cut.”
“We think another broad-based policy rate cut could be delivered in the coming months in the context of global competitive monetary easing, particularly if we see further declines in auction yields in the PBoC’s reverse repos. The central bank had guided auction yields in 14-day repos lower and lower before announcing a rate cut last November.”
“The PBoC could deploy another system-wide RRR cut soon rather than later in the coming weeks to raise money multiplier further to boost China’s money supply growth.”
“It appears that the PBoC has turned to stabilizing the yuan in onshore market after Chinese New Year through daily fixing and agents, which could contain ongoing capital outflows to some extent.”
Key Quotes
“The PBoC trimmed auction yield in 7-day reverse repos in its routine open market operations (OMOs) by 10 bp to 3.65% yesterday in response to climbing money market rates post the February rate cut.”
“We think another broad-based policy rate cut could be delivered in the coming months in the context of global competitive monetary easing, particularly if we see further declines in auction yields in the PBoC’s reverse repos. The central bank had guided auction yields in 14-day repos lower and lower before announcing a rate cut last November.”
“The PBoC could deploy another system-wide RRR cut soon rather than later in the coming weeks to raise money multiplier further to boost China’s money supply growth.”
“It appears that the PBoC has turned to stabilizing the yuan in onshore market after Chinese New Year through daily fixing and agents, which could contain ongoing capital outflows to some extent.”