People's Bank of China MLF rate at 2.5% (expected 2.5%, prior 2.5%): injects 1450bn yuan

<p>Injects 1450 bn yuan for 1 year</p><ul><li>850bn yuan of MLF mature today</li><li>thus a 600 bn yuan injections via 1 year funds, the largest since December 2016</li></ul><p>-</p><p>More:</p><ul><li>PBOC will issue 30 billion yuan of 3-month central bank bills and 15 billion yuan of 1-year bills in Hong Kong on November 21.</li></ul><p>-</p><p>What is the MLF?</p><p>The PBOC's MLF rate is a benchmark interest rate that banks in China can use to borrow funds from the People's Bank of China for a period of 6 months to 1 year, as medium-term liquidity to commercial banks.</p><ul><li>The rate is typically announced on the 15th of each month. </li><li>The interest rate on the MLF loans is typically higher than the benchmark lending rate (more on these below), which encourages banks to use the facility only when they face a shortage of funds.</li><li>MLF loans are secured by collateral, which can be a wide range of assets including bonds, stocks, and other financial instruments. The collateral ensures that the PBOC can recover the funds if the borrower defaults on the loan.</li></ul><p>The MLF rate sets the scene for the monthly Loan Prime Rate (LPR) setting on the 20th. Current LPR rates are:</p><ul><li>3.45% for the one year</li><li>4.20% for the five year</li></ul><p>The MLF has already been cut twice since June. In August it was cut from 2.65% to 2.5%. At the same time, the 7-day reverse repo rate was cut, to 1.8% from the prior 1.9%. The cut to the MLF paved the way for an LPR cut in August, the 1-year was trimmed to 3.45% from 3.55% while the 5-year remained unchanged.</p><p>-</p>

This article was written by Eamonn Sheridan at www.forexlive.com.