Mizuho with the report:
• Both China’s 1Y and 5Y loan prime rates were kept unchanged earlier today, as the PBoC will probably wait another few weeks to see how previous easing measures play out after excluding the distortion from the LNY holiday. We note that the PBoC has already made liquidity injections of RMB300b via MLF in January and February. Official PMIs due next Monday (28 Feb) and domestic activity indicators, such as FAI and retail sales, for January and February combined due in mid-March are expected to send China’s policymakers a clearer message.
• We look for more policy support, including another 50bp RRR cut and 10bp interest rate cut over the next few weeks, in order to help China reach its annual growth target. Note that 29 out of 31 provincial local governments set this year’s growth targets at “around 5.5%” or above. Even for the lowest two, Beijing and Tianjin, they both set a target of “above 5.0%”. Although we saw a mild recovery in domestic activity post the LNY holiday (Fig 3&4), a cooling property sector and continued hidden unemployment are expected to weigh on the economy (see Mizuho China Macro: Aim high, shoot low? 17 Feb 2022).
• Escalating Russia/Ukraine geopolitical concerns pushed global credit spreads wider last week, and Chinese IG dollar bond spreads went along for the ride (+5bp to UST). Meanwhile, Chinese high yield spreads fared even worse (+98bp to UST) after Zhenro Properties warned its “existing internal resources may be insufficient to address its upcoming debt maturities in March 2022”.
Developer spreads terrible:
