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China's Central Bank Cuts Reserve Ratio, Unleashes 500 Billion Yuan Stimulus, 10-Year Bond Yield Falls to 2%

Sep 24, 2024, 01:38 AM

China's central bank has announced a series of aggressive monetary policy measures aimed at stimulating the economy and achieving its annual growth target of around 5%. The People's Bank of China (PBOC) cut the reserve requirement ratio by 50 basis points, reduced the 14-day reverse repo rate by 10 basis points to 1.85%, and plans to further decrease the 7-day policy rate by 20 basis points to 1.5%. Additionally, the PBOC will lower mortgage rates for existing home loans and reduce the down payment requirement for second homes from 25% to 15%. In a rare briefing, PBOC Governor Pan Gongsheng outlined these measures, which also include allowing funds, brokers, and insurers to access central bank funds to buy stocks, and the introduction of new policy tools to support the stock market. The announcement has led to a significant drop in bond yields, with the 10-year bond yield falling to 2% for the first time on record. The PBOC will provide 1 trillion yuan worth of long-term funds, and plans at least 500 billion yuan of liquidity support to stocks. These steps are part of broader efforts to revive growth amid a deepening property market crisis and weak consumer demand.