CNY rates: PBOC announces bonds borrowing – DBS
|The People’s Bank of China (PBOC) announced CGB borrowing from primary dealers earlier this week. Reportedly, the central bank identified two potential operators yesterday. Such policy change echoes the PBOC Governor's earlier speech on deepening monetary policy tools through CGB transactions, DBS Economist Samuel Tse notes.
PBOC still aims to stabilize exchange rates
“The market interprets the long-end bond borrowing as a prelude to bond sales to cool the CGB rally. From a FX perspective, higher CGB yields and a narrower spread against UST counterparts could help alleviate pressure on CNY exchange rates. Note that the PBOC still aims to stabilize exchange rates to forestall capital outflow.”
“Our core strategy of steepening is still at play. Potential long tenor bond selling matches our view that 10Y yields will likely stabilize in the near term. The 10Y CGB yield once rebounded to 2.27% this week after hitting the historical low of 2.18% following the announcement.”
“However, short-end CGB yields could head south further as monetary easing is still on the cards. Another round of RRR cuts is likely in 3Q amid an uneven recovery and slowing credit growth.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.