Medium Term Lending Facility of the People’s Bank of China (MLF)
The People’s Bank of China injects 103 billion yuan via a one-year multilateral fund at 2.65% 9 where 125 billion yuan was expected, before injecting 237 billion yuan)
- 100 billion yuan of the Multilateral Fund is ripening today
- So the net injection of the MLF is 3 billion yuan
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The MLF rate of the People’s Bank of China is a benchmark interest rate that banks in China can use to borrow money from the People’s Bank of China for a period of 6 months to 1 year, and medium-term liquidity for commercial banks.
The price is usually announced on the 15th of every month. Since the 15th was Saturday, we get it today instead.
The interest rate on MLF loans is usually higher than the standard lending rate (more on these below), which encourages banks to use the facility only when faced with a shortage of funds.
The MLF rate sets the scene for setting the monthly Loan Principal Rate (LPR) on the 20th. The current LPR rates are:
- 3.55% for one year
- 4.20% for five years
MLF loans are secured by collateral, which can be a wide range of assets including bonds, stocks and other financial instruments. The guarantee ensures that the People’s Bank of China can recover the money if the borrower defaults on the loan.