Market Mixed on PBOC’s Next Policy Move

Source: Bloomberg

The market is mixed on the next move of the People’s Bank of China on policy rates, following the surprise reserve requirement reduction last week.

• UBS Asset Management Head of Fixed Income Hayden Briscoe believes the PBOC shifted to an easing cycle which has more to go after the reserve requirement cut.
• Briscoe said China could cut 10-year bond yields by as much as 100 basis points to mark a historic low.
• Citic Securities Head of Fixed-Income Research Ming Ming predicts lenders to lower the loan prime rate as China moves to reduce funding costs.
• Barclays Asia Pacific Economist Chang Jian forecasts a 50-basis point reduction in the ratio by the fourth quarter.
• Nomura’s Lu Ting and NatWest’s Liu Peiqian believe the PBOC will use more targeted measures than another reserve requirement reduction.
• The PBOC last week explained the cut was a step to enhance liquidity, and monetary policy will continue to be prudent.