China: Has the PBOC entered a rate-hiking cycle? - Nomura

Analysts at Nomura note that the People’s Bank of China (PBoC) Monetary Policy Implementation Report emphasised the curbing of financial risks and minimising asset bubbles, which suggests a marginal tightening bias for its “prudent and neutral” policy stance. 

Key Quotes

“The monetary policy regime has shifted to focus on money market interest rates and open market operations (OMOs), so the rise in money market rates following the lunar new year holidays should be viewed as a rate hike, in our view.”

“The rising PPI does not appear to be a major concern for monetary policy.”

“We expect no further OMO rate hikes in the short term.”

“Rates strategy: We maintain a 2s5s repo-NDIRS flattener trade with a bias to add pay overlay on dips.”