The PBOC’s Visible Hand

Media reports today claimed that the PBOC has asked banks to buy more corporate bonds, and is offering liquidity via the Medium-Term Lending Facility (MLF) proportional to those bond purchases. These reports, if true, reflect a further step in PBOC monetary easing, in trying to improve liquidity in the corporate bond market, but do not reflect a relaxation of regulatory tightening. More MLF issuance will see the PBOC’s balance sheet expand, and deliver additional depreciation pressure to the yuan, as seen in markets today.

Posted July 24, 2018
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