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Money market rates fall after PBOC injects funds
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China yesterday continued to see money market rates fall for the second straight day after the central bank injected 29 billion yuan (US$4.8 billion) on Tuesday via seven-day reverse repurchase operations for the first time in three weeks.
The seven-day Shanghai Interbank Offered Rate, a key measure of fund availability in the banking system, slid 58.1 basis points to 5.616 percent yesterday, below its 10-day average.
The seven-day bond repurchase rate, another gauge of market liquidity, dropped 85 basis points to 5.5 percent yesterday.
On Monday, China’s money market rates rose to the highest since June as banks amassed cash to meet year-end regulatory requirements.
The People’s Bank of China have suspended fund injections through open market operations for three weeks, which stirred fears that the central bank would take a hard stance as it did during the previous cash squeeze in June. The liquidity crunch eased right after the PBOC resumed fund injection via reverse repurchases.
The PBOC will continue to use open market operations and short-term liquidity operations to ease tight money conditions in the future, China International Capital Corp, the country’s biggest investment bank, said earlier this week.
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