Case builds for China’s banks to cut deposit rates

A piece from Reuters citing various sources, some unnamed.

Last week the People’s Bank of China left its key indicative mortgage rate, the 5 year LPR unchanged, against widespread expectations of a cut:

Despite leaving the 5yr untouched, China’s banks will cut deposit rates soon as part of efforts to make mortgages more affordable and revive property demand say analysts cited by Reuters.

  • China did not opt for a broad rate cut that would further depress banks’ narrow net interest margins, instead deferring to banks to cut their deposit rates and give themselves room to cheapen mortgages, analysts said.
  • major state-owned banks might take the lead in cutting deposit rates, setting off a chain of such cuts, two banking sources told Reuters.
  • Lowering deposit rates will give banks much needed wiggle room to cut mortgage rates.
  • Xing Zhaopeng, a senior China strategist at ANZ, points to how deposit rates are pegged to the one-year LPR and estimates banks will cut those by 20 basis points. He also expects a tweak to rules so that existing mortgage rates can be reset lower. “The plan to reduce existing mortgage rates is in the making,” Xing said.

Bolding above is mine. There is more info at the link, worth checking out:

This article was written by Eamonn Sheridan at Source