Analysts at TD Securities point out that China’s PBoC announced yesterday that it will cut the RRR by 0.5% for commercial lenders from January 6 releasing more than CNY 800bn in long term funds.
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“PBoC noted that its ‘Prudent monetary stance remains unchanged’. In part the RRR cut is likely being undertaken to compensate for potentially significant liquidity withdrawal ahead of Lunar New Year holidays as well as liquidity demands due to a likely surge in local government bond sales this month.”