rtmark
LearnBonds.com

China Reduces Interest Rates to Support Banks

China stock market

Commercial lenders in China have been offered medium-term funding to reduce interest rates in charges for money. China’s Central Bank made this move to cushion the effect of the coronavirus in the country.

On Monday, the Chinese Bank offered a medium-term loan of $29 billion (200 billion yuan) which is valid for one year.

The rate was reduced to 3.15% which became the lowest since 2017. The Bank equally offered funds of about 100 billion yuan for the 7-day reverse repurchase agreements. It would result in the withdrawal of 700 billion yuan from the market when the 1 trillion reverse repos yuan matures today.

Although the amount of injection is small, the rate of reduction meets the “inline of expectations”. According to an analyst at Huachuang Securities, Zhou Guannan, there are expectations for additional MLF, which may be supplied next month.

After the coronavirus outbreak at the start of the New Year, the Chinese Government and its Central Bank have been announcing early bond sales, small rate cuts, and other measures that could support companies and calm financial markets. As it stands, there is a heavy increase in stimulus, but that could change when and if the epidemic disease is brought under control.

Expected rate to fall

Today’s rate cut could be similar to a previous rate cut in loan prime rate, based on household and business loans. According to a recent survey by Bloomerang, economic experts are expecting the 1-year loan rate to reduce by 10 basis points at the announcement on February 20.

Chinese 10-year government bonds fell 0.27% shortly after the operation while the 10-year yield increased by 3 basis points to 2.90%.

Macro Strategy head at Standard Chartered Plc, Becky Liu, said the injection is quite small. She added that the operation would minimize the incentive to pursue policy banknotes and Chinese government bonds.

She further stated that it could mean that PBOC would not be lowering front-end rates henceforth.

According to Becky, most investors are not really concerned about the lack of volatility considering the present market conditions, because it’s certain that PBOC may lower front-end rates at a time.

To collaborate her opinion, economic analysts at Commerzbank AG, Zuo Hao, said that from today’s operation, any reduction in bonds would provide an opportunity for investors to get more debts. He, however, noted that the current situation regarding the handling of coronavirus disease would have a lot to do with investors’ response.

Trusted & Regulated Stock & CFD Brokers

Rating

What we like

  • 0% Fees on Stocks
  • 5000+ Stocks, ETFs and other Markets
  • Accepts Paypal Deposits

Min Deposit

$200

Charge per Trade

Zero Commission

Rating

64 traders signed up today

Visit Now

75% of investors lose money when trading CFDs.

Available Assets

  • Total Number of Stocks & Shares5000+
  • US Stocks
  • German Stocks
  • UK Stocks
  • European
  • ETF Stocks
  • IPO
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 Zero Commission
  • NASDAQ Zero Commission
  • DAX Zero Commission
  • Facebook Zero Commission
  • Alphabet Zero Commission
  • Tesla Zero Commission
  • Apple Zero Commission
  • Microsoft Zero Commission

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
  • Paypall
  • Skrill
  • Neteller

Rating

What we like

  • Sign up today and get $5 free
  • Fractals Available
  • Paypal Available

Min Deposit

$0

Charge per Trade

$1 to $9 PCM

Rating

Visit Now

Investing in financial markets carries risk, you have the potential to lose your total investment.

Available Assets

  • Total Number of Shares999
  • US Stocks
  • German Stocks
  • UK Stocks
  • European Stocks
  • EFTs
  • IPOs
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 $1 - $9 per month
  • NASDAQ $1 - $9 per month
  • DAX $1 - $9 per month
  • Facebook $1 - $9 per month
  • Alphabet $1 - $9 per month
  • Telsa $1 - $9 per month
  • Apple $1 - $9 per month
  • Microsoft $1 - $9 per month

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
Users should remember that all trading carries risks and users should only invest in regulated firms. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
Ali Raza

A journalist, with experience in web journalism and marketing. Ali holds a master degree in finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of cryptocurrency publications.