Early Thursday morning in Asia, Bloomberg came out with the news suggesting the People’s Bank of China (PBOC) could announce this year’s third rate cut for medium-term loans to ensure sufficient liquidity.
Key quotes
The People’s Bank of China is expected to roll over at least part of the 200 billion yuan ($28 billion) in the medium-term lending facility that comes due on Thursday, at a charge lower than the current 2.95%, according to analysts. They are anticipating a cut of up to 20 basis points in the one-year loan rate.
The bond market may react negatively to send yields higher if the central bank disappoints traders with no rate cut, said Brad Gibson, co-head of Asia Pacific fixed income portfolio management at AllianceBernstein in Hong Kong.
FX implications
Following the news, AUD/USD registers an uptick from 0.6453 to 0.6458 but stays pressured amid broad risk-off. The additional rate cut from the largest customer suggests a positive move by the Aussie pair.
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