SHANGHAI, Aug 26 (Reuters) – China’s central bank rolled over maturing medium-term loans and injected cash through its liquidity instruments on Monday, underlining market expectations for further easing as the economy struggles to gain traction.
The People’s Bank of China (PBOC) said it was keeping the rate on 300 billion yuan ($42.11 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions at 2.30%, unchanged from the previous operation.
And it injected another 471 billion yuan through seven-day reverse repos while keeping borrowing costs unchanged at 1.70%.
“Today’s outcome adds to expectation for a near-term reserve requirement ratio (RRR) cut,” said Frances Cheung, head of FX and rates strategy at OCBC Bank.
“Meanwhile, as U.S. rates fell further, there may also be renewed expectations for an interest rate cut (in China).”
China is struggling with a prolonged property crisis that has curbed investment and dented consumer demand.
Monday’s reverse repo operation was meant to “keep month-end banking system liquidity conditions reasonably ample,” the central bank said in an online statement.
A batch of 401 billion yuan worth of MLF loans was due earlier this month, when the PBOC said it would postpone the loan rollover.
OCBC’s Cheung expected the difference in yields between 5-year and 30-year, and 2-year and 30-year China government bond yields, to steepen.
PBOC Governor Pan Gongsheng, in remarks published in state media on Saturday, said the central bank would adhere to supportive monetary policy to guide reasonable growth in credit lending and help the world’s second-largest economy.
($1 = 7.1244 Chinese yuan)
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Reporting by Shanghai Newsroom; Editing by Jacqueline Wong
Our Standards: The Thomson Reuters Trust Principles.
