Key Points – August Report

Liquidity tightened in August, still seeing pressure from tax payments, local government bond issuance and the huge size of reverse repo maturities, the latest MNI Liquidity Conditions Index shows.

The Liquidity Condition Index stood at 84.4 in August, up from the 68.8 recorded in July. The higher the index reading, the tighter liquidity appears to survey participants.

The Economy Condition Index remains at elevated levels as the economy recovers, with all respondents seeing an improvement or unchanged outlook.

The PBOC Policy Bias Index was little changed, although almost 40% of those surveyed now saw the PBOS with a tightening bias. --

The Guidance Clarity Index edged lower, although the central bank is still seen giving clear indications of its intentions.

The MNI survey collected the opinions of traders at financial institutions operating in China's interbank market, the country's main platform for trading fixed income and currency instruments, and the main funding source for financial institutions. Interviews were conducted between Aug 10 and 21.