Deutsche Bank-Asia Thematic Strategy Notes RMB PBoC restart bond trading-108972145

DeutscheBankFixedIncomeDateResearch2July2024AsiaThematicAsiaStrategyNotesChinaRMB:PBoCrestartbondtradingIntherecentannualLujiazuiForum-ahigh-profiletwo-dayfinancialconferenceinPerryKojodjojoShanghai,whichusuallyattractsmajorfinancialregulatorsandinstitutions-PBoCStrategistGovernorPanGongshengdeliveredacandidandinformativespeechentitled+852-22036153“China'scurrentmonetarypolicystanceandtheevolutionofitsfutureframework".HazelLaiOneofthetopicshespokeaboutwastoconfirmthatthePBoCwouldresumeMacroStrategisttradingCGBsinthesecondarymarketasasupplementaryliquiditytoolinits+852-2203-6150monetarytoolkit.ThediscussionaroundthishaspickedupsinceMarch,followingaSouthChinaMorningPost(SCMP)reportquotingPresidentXi'sspeechattheCentralFinancialWorkConferencelastOctober,callingfor“enrichingthetoolboxofmonetarypolicyinstrumentsandincreasingTreasurybondtradesintheopenmarket".InanenvironmentwherethemarketisbecomingincreasinglyconcernedaboutChina'sgrowthoutlook,particularlyitsmedium-termtrajectory,thenewliquiditytoolhasraisedquestionsonwhetherChinaismovingtowardsquantitativeeasingtosupportgrowth.Inthisreport,wetouchuponafewkeyquestionsonthistopic,including;(a)howPBOChasmanagedliquidityinthepast;(b)whyTreasurybondtradingisnowbeingconsideredaspotentiallyapartofpolicytoolkit;(c)whetherthePBoCisembarkingonquantitativeeasing;and(d)impl...