Coming up today is the monthly PBOC Medium-term Lending Facility (MLF). The MLF rate is currently 2.65%. Expectations for a cut to the rate are very low, but not zero. A cut is a low but non-negligible chance.
Due around 0115 GMT.
The MLF rate is a benchmark interest rate that banks in China can use to borrow funds from the People’s Bank of China for a period of 6 months to 1 year, medium-term liquidity to commercial banks.
The rate is normally announced on the 15th of each month.
The interest rate on the MLF loans is typically higher than the benchmark lending rate (more on these below), which encourages banks to use the facility only when they face a shortage of funds.
The MLF rate sets the scene for the monthly Loan Prime Rate (LPR) setting on the 20th.Current LPRs:
- 3.55% for the one year
- 4.20% for the five year
MLF loans are secured by collateral, which can be a wide range of assets including bonds, stocks, and other financial instruments. The collateral ensures that the PBOC can recover the funds if the borrower defaults on the loan.
This article was written by Eamonn Sheridan at www.forexlive.com. Source