PBOC 1 year MLF rate cut to 2.65% (prior 2.75%), as widely expected

The MLF rate is a benchmark interest rate that banks in China can use to borrow funds from the People's Bank of China for a period of 6 months to 1 year, medium-term liquidity Liquidity Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Read this Term to commercial banks.

The rate is typically announced on the 15th of each month.

The interest rate on the MLF loans is typically higher than the benchmark lending rate (more on these below), which encourages banks to use the facility only when they face a shortage of funds.

The MLF rate sets the scene for the monthly Loan Prime Rate (LPR) setting on the 20th.

Current LPR rates:

• 3.65% for the one year
• 4.30% for the five year

MLF loans are secured by collateral, which can be a wide range of assets including bonds, stocks, and other financial instruments. The collateral ensures that the PBOC can recover the funds if the borrower defaults on the loan.