PBOC Gauges Banks' Demand for Loans at Lower Costs, Reuters Says

  • MLF interest rates were cut in January, February operations
  • Government bonds advance, while interest-rate swaps decline

The People’s Bank of China gauged demand for medium-term loans Wednesday at an interest rate lower than it’s offered in the past, Reuters reported, citing people it didn’t identify.

The monetary authority lowered the cost of the three- and six-month, and one-year Medium-term Lending Facility by 25 basis points to 2.5 percent, 2.6 percent and 2.75 percent, respectively, Reuters reported.

The central bank has steadily reduced rates for MLF operations this year while keeping the benchmark interest rate unchanged since October. In managing short-term liquidity, the PBOC drained almost a record amount from the system over the last four weeks.

The yield on government notes due January 2026 fell four basis points to 2.81 percent as of 5:24 p.m. in Shanghai, according to National Interbank Funding Center prices. That’s the lowest level for a benchmark security since Jan. 22, ChinaBond data show.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repurchase rate, dropped three basis points to 2.27 percent, the lowest since Feb. 18, data compiled by Bloomberg show. The seven-day repo rate, the benchmark gauge of interbank funding availability, was little changed at 2.29 percent, data from the National Interbank Funding Center show.

— With assistance by Helen Sun

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