China pumps record cash into market to tame pre-holiday rates

"We have not seen the spikes in repo rates that we usually did see ahead of the Chinese New Year, likely upon willingness from the PBOC to provide liquidity," she wrote in a research note distributed on Tuesday morning.

The benchmark 7-day repo rate began moving upward as the Spring Festival approached, but Tuesday's massive injection has signalled to the market the bank's determination to keep rates in check by lowering the price of money.

A total of 198 billion yuan in maturing instruments are set to drain cash from the markets this week, which will be more than offset by Tuesday's injection, and the bank has the option to inject even more funds during upcoming open market operations on Thursday.

"Now that the central bank has announced that it will more frequently use open market operations to adjust liquidity, the market widely expects that money market rates will stabilise and will not spike too much even during holidays or at the end of months or quarters," said the senior trader in Beijing.

Market participants said the PBOC's recently announced decision to allow select institutions to bid for reverse repos on a daily basis, instead of just on Mondays and Wednesdays, shows that it is planning to intensify the tempo and precision with which it moves money in and out of the interbank market.

"We believe interbank rates will only climb a little bit the rest of this week and the PBOC is unlikely to cut RRR as

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