According to analysts at ANZ, the RRR cuts from PBoC, which are estimated to inject CNY900bn liquidity into the system, will reduce banks’ funding costs via lower quotes for the loan prime rate (LPR), encouraging loan issuances.
Key Quotes
“The additional 100bps cut for urban commercial banks will help alleviate their funding constraints and mitigate the financial risks in China’s banking system.”
“We see limited room for further RRR cuts in 2019 and the next policy move will be cutting the money market rate, likely in Q4.”
“Downward pressure on China Government Bond (CGB) yields remains and we maintain our forecast for 10Y CGB yield falling below the 3% handle before the end of 2019.”
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