Yuan Depreciation About Liquidity Not Trade

The Chinese central bank will be buying more corporate bonds and China is doing more QE while the Fed continues moving toward tighter policy. Chinese financial institutions have been asked to reduce borrowing costs for firms amid the sharp expansion in defaults. Banks will receive double the amount of MLF loans for investment in corporate bonds rated below AA+ they will get 2CNY for 1CNY loans/investment according to the head of RBC's Asia FX strategy Sue Trinh. This is happening just as we are seeing an acceleration in corporate bond defaults, she adds. The depreciation in the currency is a by-product of the PBOC injecting liquidity to stave off a crisis of credit not retaliation in trade.

Vincent Cignarella  Bloomberg Americas macro Squawk-SQU <GO> on your Bloomberg terminal