Case builds for China's banks to cut deposit rates

<p>A piece from Reuters citing various sources, some unnamed. </p><p>Last week the People's Bank of China left its key indicative mortgage rate, the 5 year LPR unchanged, against widespread expectations of a cut:</p><ul><li><a href="https://www.forexlive.com/centralbank/pboc-loan-prime-rates-lpr-cut-1-year-345-prior-355-5-year-42-prior-420-20230821/" target="_blank" rel="follow" data-article-link="true">PBOC Loan Prime Rates (LPR) CUT: 1-year 3.45% (prior 3.55%) &amp; 5 year 4.2% (prior 4.20%)</a></li></ul><p>Despite leaving the 5yr untouched, China's banks will cut deposit rates soon as part of efforts to make mortgages more affordable and revive property demand say analysts cited by Reuters. </p><ul><li>China did not opt for a broad rate cut that would further depress banks' narrow net interest margins, instead deferring to banks to cut their deposit rates and give themselves room to cheapen mortgages, analysts said.</li><li>major state-owned banks might take the lead in cutting deposit rates, setting off a chain of such cuts, two banking sources told Reuters.</li><li> Lowering deposit rates will give banks much needed wiggle room to cut mortgage rates.</li><li>Xing Zhaopeng, a senior China strategist at ANZ, points to how deposit rates are pegged to the one-year LPR and estimates banks will cut those by 20 basis points. He also expects a tweak to rules so that existing mortgage rates can be reset lower. "The plan to reduce existing mortgage rates is in the making," Xing said.</li></ul><p>Bolding above is mine. There is more info at the link, worth checking out:</p><ul><li><a href="https://www.reuters.com/world/china/case-builds-chinas-banks-cut-deposit-rates-2023-08-25/" target="_blank" rel="nofollow">Analysis: Case builds for China's banks to cut deposit rates</a></li></ul>

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