China cuts another policy rate

BEIJING • China's central bank rolled over some of the targeted funds due yesterday while cutting interest rates on the loans, the latest in a string of measures aimed at ensuring sufficient liquidity amid the coronavirus pandemic.

The People's Bank of China injected 56.1 billion yuan (S$11.3 billion) into the banking system via the targeted medium-term lending facility (TMLF), just as 267.4 billion yuan of the debt comes due.

The one-year funding was offered at an interest rate of 2.95 per cent, lowered from the 3.15 per cent of the last operation in January. Analysts had expected a cut after the central bank lowered rates on some of its other policy tools to all-time lows.

It skipped offering short-term funding via open market operations for a 17th consecutive day. The yield on 10-year government bonds extended declines to 2.46 per cent after the announcement, the lowest since 2002.

A flurry of measures in recent months have kept liquidity ample to support China's weakened economy, with data last week showing the first contraction in decades in the first quarter.

Yesterday's rate cut puts the TMLF back in line with other monetary tools. Lockdowns to contain the virus are set to result in China's slowest annual economic growth since the 1970s.

"The size of the offering shrunk quite a bit," said Ms Becky Liu, head of China macro strategy at Standard Chartered Bank in Hong Kong. "That suggests that the TMLF facility is no longer very attractive to banks."

BLOOMBERG