PBoC nudged rates higher
PBoC nudged rates higher, in an unexpected move that would appear to key off the Fed's expected rate hike. The PBoC boosted the rates its charges on open market operations and on its medium term lending facility. However, the increases were a modest 5 bps on the cost of a 7-day and 28-day repo, while the PBOC lifted the cost of funds lend on MLF 5 bps, leaving the 1-year rate at 3.25%. While the rate moves are very small, they do suggest the PBOC is biased toward tightening next year. That perception, of course, may reduce the risk of Yuan depreciation. Note that the 7-day repo rate has become the new standard for PBoC policy. The 1-year lending and deposit benchmark has been unchanged since 2015, and hence appears to have fallen out of favor with policymakers. The PBoC did not move rates when the Fed last hiked in June, but they did raise rates in mid-March. The CSI 300 is down 0.35%, the Hang Seng nearly 0.1% lower and the Nikkei 0.1% in the red.