Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

China leaves lending benchmarks unchanged for 3rd straight month in Nov

Published 11/20/2022, 08:23 PM
Updated 11/20/2022, 10:56 PM
© Reuters. FILE PHOTO: The headquarters of the People's Bank of China, the central bank, in Beijing, China, February 3, 2020. REUTERS/Jason Lee

SHANGHAI (Reuters) -China kept its benchmark lending rates unchanged for the third straight month on Monday, as a weaker yuan and persistent capital outflows continued to limit Beijing's ability to ease monetary conditions to support the economy.

But sluggish credit demand and a darkening growth outlook have prompted some traders and market analysts to predict a marginal reduction to the mortgage reference rate as early as next month to prop up the broader economy.

As expected, the one-year loan prime rate (LPR) was kept at 3.65%, while the five-year LPR was unchanged at 4.30%.

In a Reuters poll of 22 market watchers conducted last week, all respondents predicted no change to the one-year LPR. However, five participants expected a reduction to the five-year LPR.

The steady LPR fixings came after the People's Bank of China (PBOC) partially rolled over maturing medium-term policy loans last week and kept the interest rate unchanged for a third straight month, suggesting policymakers remained wary of stoking further yuan weakness by easing monetary conditions.

The medium-term rate, called the medium-term lending facility, serves as a guide to coming changes in the LPR.

Meanwhile, widening policy divergence with other major economies, particularly the United States, could worsen fund flows. The latest official data showed that overseas investors had sold their holdings of China's onshore bonds for a ninth straight month in October, the longest streak of outflows on record.

The yield gap between China and the United States hovered at the widest level in 15 years, and the yuan has lost more than 10% against the dollar so far this year and looks set for the biggest annual drop since 1994.

However, some traders and market analysts expect a reduction to the mortgage reference to help the embattled property sector.

"We think there's probability to lower the 5-year LPR in December due to the downturn in the property market," said Xing Zhaopeng, senior China strategist at ANZ.

Marco Sun, chief financial market analyst at MUFG Bank (China), also said there was a chance the 5-year LPR would be lowered by 10 to 15 basis points in the next few months.

The authorities have recently extended more support to property developers.

© Reuters. FILE PHOTO: The headquarters of the People's Bank of China, the central bank, in Beijing, China, February 3, 2020. REUTERS/Jason Lee

The LPR, which banks normally charge their best clients, is set by 18 designated commercial banks that submit proposed rates to the PBOC every month.

Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. China last cut both LPRs in August to boost the economy.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.