China moves to support growth

By Alex Moffat. Published at Jan 24, 2019, in Market Wrap

The People’s Bank of China injected a record amount, CNY257.5 billion (~US$37.9 billion), into the money market yesterday in an attempt to support businesses.

The government then announced a series of measures to spur growth, including increased spending and plans for large-scale tax cuts and reductions in social security fees paid by employers. This is consistent with past monetary and fiscal moves by Chinese authorities aimed to maintain a steadily growing economy.

I'm perplexed as to why shorter dated bank bills are trading so far above the cash rate — note the chart below (the blue line is the interbank rate and the red line the 30 day bank bill rate). It suggests that funding in the money market is tight (supply and demand) and should therefore be reflected in bank lending rates such as mortgages, which it is not. Does it mean that we are likely to see some margin compression when the banks next report?

 Shorter dated bank bills are trading so far above the cash rate.

Another relationship of interest is that between the listed property trusts (red line below) and the Government 10 year bond rate (blue line) — note the general inverse correlation. Of late, though, the spread between the two has markedly widened and looks under pressure to start to reverse with bonds having rallied very strongly.

Bonds are rallying strongly.

I've also considered the yield on the 30 day bank bills at 2.03% against the yield on the 10 year government bond at 2.28% and wondered if, at a spread of just 25 basis points, it is telling me we are headed for a period of very slow economic activity, a fall in inflation, or both.

Markets were mixed overnight with the UK and Europe all down and heading into their close. The Nasdaq is down, while the S&P and Dow are up. Our index futures are down three points and the Australian dollar is at US$0.7146.

Alex Moffat is a director at Joseph Palmer & Sons.

Where to invest $1,000 right now

When the experts at Next Investors have a stock pick, it may pay to listen.

The Next Investors have been investing in ASX small cap stocks for years, with their best small cap picks yielding returns of 1,200%, 1,120%, 900% and 678%.

They have just revealed their hand-picked, FY2021 stock portfolio of high conviction long-term investments.

Click the link below to see what they are currently investing in.




S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why is Australia’s leading small cap publication

Founded seven years ago, is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise. provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more. is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!