While we await the yuan 'fix': "China averts cash crunch but not liquidity tightness "

Comments from HSBC on the People's Bank of China and credit market tightness

China averts cash crunch but not liquidity tightness

• The People's Bank of China has taken several steps to calm market nerves ahead of the liquidity intensive mid-year mark.
• While a cash crunch has become highly unlikely, moderate liquidity tightness will likely be tolerated.
• the 7-day repo rate fixing could frequently breach the 7-day Standing Lending Facility rate of 3.45% over the mid-year accounting period and tax payment season in July.
• China banks' funding costs continue to climb and the government bond supply pipeline will be much heavier in the second half of the year.

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Stress in lending markets in China over coming weeks is something to watch for, but keep in mind, as HSBC point out, this is normal for the mid-year.

China wobbles tend to impact on the AUD.