China’s central bank adds cash injections to boost market mood
China’s central bank raised its short-term cash subsidies on Wednesday to alleviate market concerns on tightening liquidity.
The People’s Bank of China (PBOC) usually only injects 10 billion yuan each day during the month, but today it pumped 50 billion yuan ($7.72 billion) through seven-day reverse repos into the banking system.
The PBOC said the measure was made to preserve stable liquidity levels at the end of the month. It is set to auction another 70 billion yuan worth of one-month cash deposits on Friday.
The volume-weighted average rate of the benchmark overnight repo traded in the interbank market was down to 2.2025% on Wednesday morning. It dropped 6.6 basis points (bps) from the previous trading, the highest since June 22.
Meanwhile, the benchmark 10-year treasury futures for December delivery jumped 0.25%. China’s 10-year government bond yield declined 1.5 bps to 2.835%.
Ming Ming, Citic Securities’ head of fixed income research, anticipates the central bank to temporarily retain its loosening tendency.