Central bank is less likely to use RRR cuts, analyst says
Tax bills, maturing medium-term loans seen tightening market
China’s benchmark money-market rate climbed the most since June, reflecting tight cash conditions, even as the central bank injected the most funds in almost three months.
The seven-day repurchase rate jumped 16 basis points to 2.48 percent at Friday’s close. More than 400 billion yuan ($62 billion) in corporate taxes deposited with commercial lenders will move out of the banking system this month, according to Huachuang Securities Co. estimates. The People’s Bank of China made less medium-term loans than those that came due in April.
The PBOC this week pumped in 680 billion yuan through reverse repo auctions, shy of a record 690 billion yuan it injected in January, when demand for cash spiked before the Chinese New Year holidays. The operations signal a preference for short-term liquidity injections over a cut to lenders’ reserve requirement ratios, which would have a system-wide effect. About 870 billion yuan of reverse repos are maturing next week. Read more