Banks offered nearly US$16bil to maintain liquidity

Continued recovery: Workers busy at a construction site at the Wangfujing shopping district in Beijing. China’s economy maintained stable recovery last month and is likely to keep the positive momentum in the following months. — AP

BEIJING: China’s central bank injected medium-term cash into the financial system, in a push to keep borrowing costs stable as China’s economy continues its recovery from the virus pandemic.

The People’s Bank of China (PBoC) added 100 billion yuan (US$15.5bil or RM63.5bil) of one-year funds with its medium-term lending facility yesterday, matching the amount coming due in a move that was expected by analysts.

The authorities kept the interest rate unchanged at 2.95%.

By keeping liquidity ample, the operation is seen to be supportive of the nation’s liquidity-sensitive stocks and also bonds.

The cost on China’s 10-year note was little changed yesterday.

In the money market, the seven-day repurchase rate rose 19 basis points to 2.18%, near its daily average level over the past year. It recently hit a four-month low.

The benchmark CSI 300 Index rose as much as 1.8%. Data showed China’s economic activity moderated in April from its record expansion in the first quarter.

That eased concerns about further tightening of fiscal and monetary policies, according to Zhang Gang, a strategist with Central China Securities Co.

The nation’s top leaders recently described the recovery as “unbalanced and unstable, ” pledging further efforts to drive a rebound in domestic demand.

China’s sovereign notes gained for three weeks in a row as of Friday, the longest run since January.

That’s even as Treasury yields have climbed and a surprisingly quick jump in the nation’s factory-gate prices were seen to pose a challenge to current monetary policy.

Factors behind the resilience include ample liquidity and capital inflows, which accelerated in April.

While the loose conditions could be tested by a rise in debt sales in May, the PBoC’s vow to keep cash supply ample has boosted confidence.

“The PBoC will stay supportive of liquidity to ensure the supply of local government bonds can be readily absorbed, when inflation does not appear to be a major concern for the central bank, ” said Frances Cheung, a rates strategist at Oversea-Chinese Banking Corp.

Beijing will step up injecting short-term cash soon, she added.

“With the expected pick-up in issuance of bonds, chance is for some net injections as and when are needed.”

The PBoC has done the minimum in its daily operations to manage short-term liquidity over the past two months.

It has been injecting 10 billion yuan (RM6.4bil) of cash daily – no matter the size of funds coming due – since the start of March. That’s a sign the central bank is so far pleased with the subdued volatility in the money market. — Bloomberg

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3

Banks , offered , money , liquidity , economy ,


Next In Business News

Govt approves wage subsidy applications worth RM1.215bil as at June 4
Zafrul: RM12.12bil approved under SME soft loan fund as at June 4
Crude oil prices fall on stronger U.S. dollar
China stocks gain after 3 days as techs shine
Azmin: Signs of economic recovery seen in 2Q
MCMC announces five-year roadmap Pakej for courier services
MBSB targets 3% growth in revenue, loans
NPC Resources submits AR 2020, so no suspension
Trading in Ipmuda shares suspended
EAC secretariat: Recovery without reform is a waste

Stories You'll Enjoy