Recently, there is growing interest in RMB Deposits or Bonds. Investor should pay attention to this new market development but remain cautious and vigilant. if in doubt, please contact your financial adviser.

Last week, the market was caught off guard by the People’s of China’s (PBOC) lowering of the offshore RMB (CNH) deposit rate in Hong Kong to 0.72% from 0.99%, effective from 1 April.

Previously, banks in Hong Kong were constrained by their credit limits in placing deposits with Bank of China, which is the sole CNH clearing bank. As a result, banks have been buyers of bank papers even at yields lower than deposit rates of ~0.8%. Under the new policy, lenders involved in CNH settlement in Hong Kong are allowed to deposit the currency in a special account with China’s central bank, which means banks will face PBOC directly.

In the short term, we expect the move to result in short-dated bond yields correcting up toward the deposit rate, which will be generally positive for CNH bonds, except for bonds that are currently trading below the deposit rate.

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}