The PBOC has been easing monetary policy throughout this year, but so far has avoided cutting interest rates on open market operations. That may change soon as abundant liquidity conditions in November will provide the central bank with a window of opportunity to follow the market and guide short-term rates lower. Steepening of the yield curve is the most likely outcome until year-end liquidity pressures resume in mid-December, with improving economic data and bond supply concerns supporting long-term rates.
