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China Inject Liquidity For Fourth Day

CHINA

The PBOC injected a net CNY 30bn of liquidity today across 7- and 14-day repos, the fourth straight day of injections and a total of CNY 340bn this week.

  • The central bank also conducted a CNY 5bn CBS operation. The CBS (central bank bills swap) is usually made to support the issuance of perpetual bonds by commercial banks. The scheme allows dealers to swap the perpetual bonds they hold for central bank bills, which will effectively boost market demand of perpetual bonds.
  • The PBOC have said previously that CBS operations have a neutral impact on liquidity, and noted CBS is not QE as it does not increase or decrease the monetary base, as dealers still own the bonds.
  • China 7-day repo rate is higher on the day at 2.20% heading into the festive period and year end. Yesterday the rate touched a low of 0.65%. 14-day repo rates are lower on the day at 2.75%, and have been declining since touching peaks on Tuesday.
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