PBoC Worried About Housing Speculation

Unlike their American counterparts, Chinese central bankers are focused on the real economy.

iFeng: 意外，降息再度落空！释放了什么信号？

The interest rate cut fell through again.

On June 15, the central bank launched a 200 billion yuan MLF operation with an interest rate of 2.95%, which was previously 2.95%.

...A signal of concern is that the MLF interest rate remains unchanged, which means that this month's LPR rate cut may fall again.

...Another signal that deserves attention is this month: the expiry amount of "spicy powder" is as high as 740 billion yuan, while the one-time addition is only 200 billion yuan.

This shows that the central bank is withdrawing cash substantially.

The third signal of concern is that the bond market has plummeted recently, and even many banks have experienced rare losses in wealth management. This is also a signal behind the loosening of expectations.

Those familiar with the financial market know that the yield of government bonds is a bottom indicator of interest rates, while the yield of government bonds is inversely proportional to the price, and bond prices have fallen sharply, which means that bond yields have risen, which further indicates that interest rates may rise.

These three signals fully indicate that currency easing is not as expected. Why is this so?

...First, the economy is recovering, and the need for "big flood flooding" stimulus has diminished.

...Second, there is no shortage of money in the market. On the contrary, there is an endless stream of arbitrage impulses, and the phenomenon of illegal capital inflows into real estate is even more so.

...Third, there is a high probability that interest rates will continue to be cut this year, but the property market will still exist as an exception.

...Once the property market goes down, all kinds of loosening will endlessly. Once housing prices rise, property market regulation will follow. Regardless of whether the RRR cuts or interest rate cuts are focused on the real economy, there will be no rain or dew.

In other words, officials do not want to stimulate real estate, only the employment and wages. Policy will tighten if they believe they have achieved this goal, and they think they are on the right track.

Only yesterday, the market expected there would be no deviation from easing money. See: Speculative Excess Appears, But PBoC Committed to Accelerated Credit Creation