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PBOC’s money injection eases liquidity stress
Print Edition
A liquidity crunch among Chinese banks eased as sentiment improved after the central bank undertook the largest daily money injection in six weeks.
The People’s Bank of China added 35 billion yuan (US$5.7 billion) to the market through seven-day reverse repurchase agreements yesterday, according to a statement.
The amount injected was the largest since October 8.
The seven-day repo rate, a measure of funding cost among banks, declined 0.99 percentage point to 4.92 percent yesterday, according to a weighted average compiled by the National Interbank Funding Center.
On Friday, the rate jumped 1.16 percentage points, the most since June, to 5.45 percent in Shanghai after the PBOC drained money in the last two weeks.
Chen Long, a researcher at the Bank of Dongguan, said the money injection from open market operations was small compared with market demand, but it indicates a willingness to calm a nervous market.
He also said that the PBOC may increase short-term money supply to ease the liquidity stress for banks but the central bank is not expected to change its overall relatively tight monetary stance.
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