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
What we like
- 0% Fees on Stocks
- 5000+ Stocks, ETFs and other Markets
- Accepts Paypal Deposits
Min Deposit
$200
Charge per Trade
Zero Commission on real stocks
64 traders signed up today
Visit Now67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
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
What we like
- Sign up today and get $5 free
- Fractals Available
- Paypal Available
Min Deposit
$0
Charge per Trade
$1 to $9 PCM
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
Share
Ali Raza
