PBoC to continue to guide funding cost lower – RBS

FXStreet (Barcelona) – Gao Qi, Trading Strategist at RBS, views that the PBoC will likely continue to guide long-term funding costs lower, with the nation continuing to stabilize economic growth while preventing systemic or regional financial risks.

Key Quotes

“While China’s June official manufacturing PMI due tomorrow could stay above the 50 mark separating growth from contraction on a monthly basis, we think the nation will continue to bolster the nation’s economic growth as weak electricity production may herald sluggish macro data for June.”

“The PBoC on Saturday cut its one-year benchmark lending rate by 25 bp to 4.85% and its one-year deposit rate by the same scale to 2.00%. Meanwhile, it also lowered RRR by 50 bp for certain banks with sizable lending to farmers and small businesses.”

“Last Friday, local media Caixin cited PBoC officials as saying that the central bank has rolled over the maturing CNY 130bn lent to banks in March via the medium-term lending facility (MLF), together with additional funds provided. The tenor was doubled to six months while lending rate declined to 3.35% from previous 3.50%.”

“In our view, the PBoC will maintain money market liquidity at a proper level and continue to guide long-term funding cost lower.”

Gao Qi, Trading Strategist at RBS, views that the PBoC will likely continue to guide long-term funding costs lower, with the nation continuing to stabilize economic growth while preventing systemic or regional financial risks.

(Market News Provided by FXstreet)