PBOC injects 34b yuan via reverse repos
Print Edition
China’s central bank poured cash into the financial system through open market operations for the second time in a week yesterday, an indication of the monetary authority’s intention to stabilize the economy while controlling risks.
The People’s Bank of China injected 34 billion yuan (US$5.55 billion) into the money market by issuing 14-day reverse bond repurchase agreements.
The yield was set at 4.5 percent, compared with 3.45 percent at the last auction of such contracts in February.
The new injection followed a 17-billion yuan 7-day reverse bond repurchase contracts sold on Tuesday, the first money injection via open market operations since early February.
“The central bank’s open market operations in this round showed a policy that can prevent irrational use of money without hurting the fragile economic recovery,” said Deng Haiqing, analyst at Hongyuan Securities.
But he said market liquidity will remain relatively tight unless the central bank initiates more significant loosening such as lowering reserve requirement for banks.
The PBOC’s recent open market operations resulted in a net injection of 136 billion yuan this week when counting cash maturing from previous note issuance.
The seven-day Shanghai Interbank Offered Rate slumped 0.42 percentage point to 4.55 percent, the lowest since July 26.
The overnight rate dropped 0.15 percentage point to 3.55 percent, while the 14-day tenor was slightly down at 5.36 percent from 5.45 percent.
The interbank market is closely watched for hints of China’s monetary policies after the central bank in June effectively engineered the decade’s worst credit crunch among banks as a warning against their risky lending practices.
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