Loan interest

China saw benchmark rate maintain in September, some expect more liquidity

SHANGHAI, Sept. 17 (Reuters) – China is set to keep its benchmark benchmark rate stable for the 17th month when it is set in September next Wednesday, a Reuters survey showed, but market participants expect more targeted liquidity measures as the economy grapples with the fallout from the Delta variant.

Nineteen traders and analysts, or 95% of 20 participants, in the snapshot survey predicted no change in the prime lending rate (LPR) at one year or the five-year term after the People’s Bank of China ( PBOC) maintained the interest rate. on its medium-term credits stable this week.

The last respondent predicted a marginal decrease of 5 basis points in one-year LPR and did not foresee any change to the five-year term, which influences mortgage pricing. The authorities have stepped up measures to cool the housing market this year amid rising house prices and financial risks.

The one-year LPR is currently 3.85% and the five-year rate is 4.65%.

Expectations of a steady LPR fixing come after the PBOC this week pledged more than 600 billion yuan ($ 93.04 billion) in medium-term loans, while keeping the interest rate unchanged for the 17th. consecutive month.

The interest rate on the Medium Term Loan Facility (MLF) serves as a guide for the LPR, and many traders and analysts say any LPR adjustment should mimic changes in the cost of borrowing MLF loans.

Ken Cheung, chief Asian currency strategist at Mizuho Bank, said the fact that the 1-year MLF rate remained stable “signaled (the) slim chance of lowering the LPR this month.”

Despite this, market participants expect policymakers to provide more liquidity and budget support to stop a slowdown in the world’s second-largest economy. Activity indicators in August showed further coronavirus outbreaks and supply disruptions threatening the country’s economic recovery.

“The Delta wave has had a pretty heavy impact on China’s growth, especially in the service sector,” said Chen Jingyang, Greater China Economist at HSBC.

“As growth approaches the lower end of the officially estimated 5.0-5.7% potential growth range, Beijing may step up targeted easing to generate a moderate recovery in growth in our view,” he said. Chen said.

She expects Beijing to further accelerate special bond issuance and roll out more targeted easing measures, including targeted reductions in the reserve requirement ratio (RRR) to support SMEs.

The LPR is a benchmark loan rate set monthly by 18 banks.

The 20 survey responses were collected from selected participants on a private messaging platform. ($ 1 = 6.4488 Chinese yuan) (Reuters Bond Team Report, written by Winni Zhou; edited by Ana Nicolaci da Costa)