PBOC’s New Rate Regime to Aid Liquidity and Bonds, Analysts Say

Central Banks PBOC’s New Rate Regime to Aid Liquidity and Bonds, Analysts Say The People’s Bank of China’s latest refinement of its monetary policy toolkit is expected to damp money-market volatility and support bonds, according to analysts. Setting a narrower corridor for the overnight interbank repo rate —defined by a reset of temporary overnight repo and reverse repo rates —will impact the market in two distinct ways, analysts say. First, the compressed boundaries will limit intraday swings in short-term borrowing costs. Second, it will drive both the upper and lower bounds of the corridor lower, anchoring market expectations for cheap liquidity.