China Money Markets Suggest Even More PBOC Support Required
- Money market rates hover above the costs of PBOC tools
- StanChart’s Liu expects multiple moves to boost liquidity
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Beijing has pumped a record amount of short-term cash into its financial system to shore up lending in recent days, only to elicit a refrain familiar to China watchers this year — not enough, more required.
Signals in the money market show traders expect borrowing costs to remain elevated for the rest of the year, despite the cash injections. A one-year gauge of bank funding costs in the market has shot up above the level the People’s Bank of China lends at, an unusual occurrence since 2019 that points at scarce liquidity in the system.