PBOC rate cut: 1-year MLF loan rate at 2.75% vs. 2.85%, repo rate also reduced

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The PBOC cut the rate it is charging on its one-year medium-term loan facility to 2.75% from 2.85% previously

The Bank also cut the 7-day repo rate to 2% from 2.1% previously

The Chinese economy is struggling with:

  • ongoing new COVID outbreaks and associated restrictions and lockdowns
  • job security concerns
  • worsening real estate crisis makes borrowers wary of more debt

I posted this weekend on the liquidity

Liquidity

Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. So, if an asset is extremely liquid, it means that one can trade that asset knowing that their specific trade will not create significant movements in the market. This is because there are so many traders both long and short, generating huge volume for that particular asset. Liquidity in the foreign exchange marketTake the example of the foreign exchange market – it is the most liquid market in the world, since many banks, hedge funds and individual traders are involved in the buying and selling of vast cumulative amounts of currencies each day. In fact, over $5 trillion is traded daily, as reported by the Bank for International Settlements. If a trader wants to go long the EUR/USD currency pair, they will have no trouble finding traders who want to go the opposite direction, due to such abundant liquidity. EUR/USD is the most liquid trading instrument in the world, regardless of the market. It is extremely easy to buy or sell, with an immense amount of trading activity for the pair. Liquidity reflects the amount and frequency of the asset that is traded, i.e. the more an asset is traded, the more liquid that asset is, making it virtually easy to buy and sell the asset. asset. Similarly, the less an asset is traded, generally the less liquid the asset is, making it more difficult to buy or sell that asset. Needless to say, liquidity is one of the key attributes a trader looks for when deciding whether or not to continue trading an instrument, as it tells the trader how stable a market is despite the masses of trades being undertaken. . This is exactly why the forex market is so attractive, since its liquid environment allows for massive trading volumes without much effect on the exchange rates of currency pairs.

Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. So, if an asset is extremely liquid, it means that one can trade that asset knowing that their specific trade will not create significant movements in the market. This is because there are so many traders both long and short, generating huge volume for that particular asset. Liquidity in the foreign exchange marketTake the example of the foreign exchange market – it is the most liquid market in the world, since many banks, hedge funds and individual traders are involved in the buying and selling of vast cumulative amounts of currencies each day. In fact, over $5 trillion is traded daily, as reported by the Bank for International Settlements. If a trader wants to go long the EUR/USD currency pair, they will have no trouble finding traders who want to go the opposite direction, due to such abundant liquidity. EUR/USD is the most liquid trading instrument in the world, regardless of the market. It is extremely easy to buy or sell, with an immense amount of trading activity for the pair. Liquidity reflects the amount and frequency of the asset that is traded, i.e. the more an asset is traded, the more liquid that asset is, making it virtually easy to buy and sell the asset. asset. Similarly, the less an asset is traded, generally the less liquid the asset is, making it more difficult to buy or sell that asset. Needless to say, liquidity is one of the key attributes a trader looks for when deciding whether or not to continue trading an instrument, as it tells the trader how stable a market is despite the masses of trades being undertaken. . This is exactly why the forex market is so attractive, since its liquid environment allows for massive trading volumes without much effect on the exchange rates of currency pairs.
Read this term trap in which the country is caught:

Chinese fiscal authorities have stepped up stimulus, now the People’s Bank of China is adding monetary stimulus.

The offshore yuan fell on news of the rate cut. There are still Talk of a PBOC rate cut was doing the rounds, but had largely died down ahead of today’s MLF deadline and the expected partial rollover. A little surprise from the PBOC today. In addition to yuan weakness, Chinese debt is higher (10-year government bonds up around 0.7%)

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