Speculative Excess Appears, But PBoC Committed to Accelerated Credit Creation

Chinese regulators will be playing an increasingly intense game of whack-a-mole as credit policy unleashes speculative activity.

iFeng: 防止资金空转套利“降息”迎来窗口期

The recent operation of the central bank's monetary policy fully embodies the "flexibility and moderation" feature. Since April, the interest rate of funds has fallen sharply and there have been "idling arbitrage" and other phenomena. In this regard, the regulatory authorities have required banks to "pressure-control prices" on structured deposits to block arbitrage channels. At the end of May, the rising interest rate of funds and the intensive issuance of government bonds led to the suspension of the reverse repurchase operation for nearly two months, and the short-term interest rate broke through the policy interest rate of the same period. Since the restart, as of now, the reverse repurchase operation has been "normalized". The central bank has carried out reverse repurchase operations for 7 trading days in the first two weeks of June.

Despite emerging symptoms of easy money, the central bank will not deviate:

Therefore, the direction of "broad currency" will not change, the previous constraints will be weakened, liquidity will continue to flow, and the MLF will be renewed when the large amount expires. On the 15th and even this week, will there be further easing measures for currency regulation? Important observation time.