Coming up today is the monthly PBOC Medium-term Lending Facility (MLF).
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 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.
The MLF rate was unchanged in February at 2.75%, as were the LPRs:
- 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.
PBOC Governor Yi Gang had his term renewed in a vote at the NPC over the weekend.
