Economic news

China Slashes Rate, Seeking to Appease Bond Market

China’s central bank shortens the key benchmark on its 1-year medium-term credits on Tuesday over extended periods of time, as policymakers work to bring a slowing economy into the fold as it is damaged by weaker demand as at home so abroad.

china central bank cuts ratesPhoto: Flickr

Despite the fact the rate cut was a moderate one, analysts consider, it might be a direct sign the regulator is set to more proactive stimulus and continues to seek for measures to ease investor concerns that higher inflation will refrain from delivering new stimulus moves.

Chinese government notes were sold off during the last several weeks on worries that regulator may consider a more cautious policy stance, amid a stronger-than-expected economic deceleration in growth.

The People’s Bank of China (PBOC) announced it was cutting the rate on its 1-year medium-term credits to financial establishments by 5 basis points from the previous 3.30 percent to 3.25 percent.

This move may cause the further diminishing in China’s new benchmark Loan Prime Rate (LPR) in the nearest time.

The PBOC also added, that it had borrowed 400 billion yuan ($56.92 billion) to financial facilities through the liquidity means on Tuesday.

The yield on benchmark 10-year Chinese government notes grew about 30 bp since early September 2019.

The Chinese yuan strengthened by 0.53 percent against the U.S. dollar, to 6.9939 at 9.09 GMT, marking thus its highs for the first time in 3 months.

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