Record cash injection by PBOC
By Feng Jianmin |
October 31, 2012, Wednesday
|
Print Edition
Print Edition
THE People's Bank of China yesterday injected the largest daily amount of cash ever into the banking system through open market operations to ease the liquidity strain.
The country's central bank yesterday injected a total of 395 billion yuan (US$62.7 billion) through 7-day and 28-day reverse repurchase agreements, exceeding a previous peak of 290 billion yuan conducted on September 25.
The 7-day repurchase rate, a measure of borrowing costs among banks and usually watched as an indicator of liquidity stress, fell to 3.2361 yesterday from a 5-week high of 4.1958 on Monday.
As there will be a drain of 189 billion yuan from the banking system from maturing bills and reverse repurchases, yesterday's record injection means the central bank has already pumped a net 206 billion yuan into the system this week.
The maturing cash this week was less than half of last week's 405 billion yuan.
"The amount is not surprising as the large amount of maturing cash drained liquidity from banks," said Zhong Zhengsheng, a senior analyst with Everbright Securities. "It seems the central bank will not cut interest rates or reserve requirements in the short term and will continue to rely on open market operations to adjust liquidity."
He added recent withdrawals of deposits by the Ministry of Finance added to the liquidity strain, and the fast appreciation of the yuan hasn't caused a strong inflow of hot money.
The central bank will conduct another regular open market operation tomorrow. It drained a net 70 billion yuan from the system last week.
Analysts said liquidity will be more abundant in the next two months due to a recovering economy. They added that the Ministry of Finance will gradually inject money into the banking system to refund a portion of pre-paid corporate income taxes.
The country's central bank yesterday injected a total of 395 billion yuan (US$62.7 billion) through 7-day and 28-day reverse repurchase agreements, exceeding a previous peak of 290 billion yuan conducted on September 25.
The 7-day repurchase rate, a measure of borrowing costs among banks and usually watched as an indicator of liquidity stress, fell to 3.2361 yesterday from a 5-week high of 4.1958 on Monday.
As there will be a drain of 189 billion yuan from the banking system from maturing bills and reverse repurchases, yesterday's record injection means the central bank has already pumped a net 206 billion yuan into the system this week.
The maturing cash this week was less than half of last week's 405 billion yuan.
"The amount is not surprising as the large amount of maturing cash drained liquidity from banks," said Zhong Zhengsheng, a senior analyst with Everbright Securities. "It seems the central bank will not cut interest rates or reserve requirements in the short term and will continue to rely on open market operations to adjust liquidity."
He added recent withdrawals of deposits by the Ministry of Finance added to the liquidity strain, and the fast appreciation of the yuan hasn't caused a strong inflow of hot money.
The central bank will conduct another regular open market operation tomorrow. It drained a net 70 billion yuan from the system last week.
Analysts said liquidity will be more abundant in the next two months due to a recovering economy. They added that the Ministry of Finance will gradually inject money into the banking system to refund a portion of pre-paid corporate income taxes.
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