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Analysts at the Australia and New Zealand Banking Group (ANZ) anticipate more measures to follow the People’s Banks of China’s (PBoC) latest reverse repo rate cut worth of 10 basis points (bps).

Key quotes

PBoC will also inject longer-term funding by conducting Medium Lending Facility on 10 or 17 February.

The PBoC will monitor the liquidity condition. If the money market is tight, it can frontload another RRR cut of 50bps within the next few weeks.

Meanwhile, we will see financial institutions to issue more debt/equity instruments for the capital supplement in H1 2020 against potential financial risks.

Conditional on these changes, onshore 10-year CGB yield may drift down by another 10-15bps after the rate cut.