PBOC injects most funds since January to offset cash squeeze


Shanghai: China’s central bank boosted the supply of cash in the financial system to the most since January, with demand surging amid a seasonal funding squeeze.

The People’s Bank of China injected a net 410 billion yuan ($60 billion) through reverse-repurchase agreements this week, data compiled by Bloomberg show. The benchmark seven-day repurchase rate fell four basis points Friday to 2.95%, according to weighted average prices.

The addition of funds will help alleviate concern that an official deleveraging campaign will exacerbate a June-end cash shortage caused by regulatory checks on banks. The injections follow comments from state media that there’s no need to panic and that the authorities will ensure funding demand will be met. Also this week, the PBOC refrained from following the Federal Reserve in raising borrowing costs.

“The PBOC doesn’t want to add additional pressure to the market at this sensitive time, and instead it’s trying to maintain a certain level of stability,” said Luo Yunfeng, head of fixed-income research at Essence Securities Co. in Beijing. “It’s aware that the deleveraging measures have brought some pressure to mid- and small-sized banks.”

The central bank provided a net 250 billion yuan through reverse repo operations on Friday, the most since 18 January, data compiled by Bloomberg show. The money will help offset the impact of corporate tax payments and funds maturing in reverse repos and the Medium-term Lending Facility, according to a PBOC statement.

The yield on the benchmark 10-year government bond fell three basis points this week to 3.58%, according to data compiled by Bloomberg. The one-year was at 3.62%, retaining an inverted yield curve. The one-month Shanghai Interbank Offered Rate rose 11 basis points this week to 4.6990, the highest since April 2015.

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