1. China central bank injects net 170 bn yuan, the most in nearly 4 months

China central bank injects net 170 bn yuan, the most in nearly 4 months

China's central bank injected a net 170 billion yuan ($24.67 billion) into money market through open market operations on Tuesday to offset liquidity stress caused by corporate tax payment and maturing repos.

By: | Shanghai | Updated: May 16, 2017 9:52 AM
The central bank has been offering longer-end liquidity repos than shorter loans recently, and has been curbing the injection of cheaper, short-term funds in continued efforts to lower leverage in the financial system. (Reuters)

China’s central bank injected a net 170 billion yuan ($24.67 billion) into money market through open market operations on Tuesday to offset liquidity stress caused by corporate tax payment and maturing repos. The People’s Bank of China’s (PBOC) rare explanation for its injection – the largest daily net injection since January 19 – comes as authorities continue to clamp down on financial risks while ensuring the economy is not being choked of funds.

The PBOC injected 150 billion yuan through seven-day reverse bond repurchase agreements and 40 billion yuan through 14-day reverse repos to “offset impact from factors including tax payment and maturing open market operations”, it said in a statement published on its website.

Twenty billion yuan of reverse repos were due to mature on Tuesday.

After the daily operation, the central bank’s net injection for the day amounted to 170 billion yuan.

The rates on the 7-day and 14-day reverse repos remained unchanged, according to the statement.

The volume-weighted average rate of the benchmark seven-day repo traded in the interbank market, considered the best indicator of general liquidity in China jumped to more than two year highs at the beginning of this month on liquidity tightness.

The seven-day rate was traded at 2.7444 percent as of 0305 GMT, around 7.6 basis points lower than the pervious close.

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The central bank has been offering longer-end liquidity repos than shorter loans recently, and has been curbing the injection of cheaper, short-term funds in continued efforts to lower leverage in the financial system.

The PBOC provided 459 billion yuan into the financial system via medium-term lending facility (MLF) loans last Friday, more than compensating for the MLF loans that matured this month.

A loan of 230 billion yuan of six-month tenure matured on May 3, while another six-month tenure 179.5 billion yuan loan is due to mature on Tuesday.

The PBOC drained a net 120 billion yuan from the money market last week.

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