PBoC resumes injections after 15-day halt

SHANGHAI • The People’s Bank of China (PBoC) resumed cash injections via open-market operations after a 15-day halt as tighter liquidity helped to drive bond yields higher.

The central bank yesterday offered 60 billion yuan (RM36.1 billion) of seven-day reverse-repurchase agreements, and kept the interest rate unchanged at 2.55%. This was the first time of such operations since Aug 21.

The injections will help offset the impact of corporate tax payments and government bond sales, and ensure liquidity is reasonable and ample within the banking system, according to a statement posted on the website.

The one-week Shanghai Interbank Offered Rate climbed to 2.69% on Tuesday, the highest level since July 18.

Rising money rates, coupled with faster than expected inflation in August, drove the yield on 10-year sovereign debt to a three-month high, which poses a risk to China’s efforts to lower borrowing costs amid an economic slowdown.

“A relatively long period of suspension in open-market operations has spurred market speculation of monetary policy tightening,” said Ming Ming, head of fixed income research at Citic Securities Co in Beijing. “As cash availability is expected to tighten at quarter-end and ahead of holidays amid rising local government bond supply, the PBoC will probably continue to pump in liquidity, helping to lower funding costs.”

China’s financial markets will be closed on Sept 24 and Oct 1-5 for public holidays. — Bloomberg