PBOC Drains Liquidity Despite Calls For Injections

The PBOC rolled over MLF loans today, injecting CNY 200bn at the normal 2.95% rate. The Bank injected CNY 10bn of reverse repos, resulting in a net drain today of CNY 10bn with CNY 20bn coming due today. Futures are just keeping in positive territory, recovering early losses as equity markets in China drop.

• The China Securities Journal reported that the PBOC is expected to add liquidity in June, a sentiment floated several times in the past few weeks. Liquidity may tighten this month with the accelerated issuance of local government bonds, increased forex purchases by overseas-listed companies for dividend payments and the maturing of more interbank deposit certificates, the newspaper said. Liquidity is unlikely to be significantly tightened in the future as the PBOC may also inject via reverse repos, though volatility may increase, the Journal said citing Song Xuetao, chief analyst at Tianfeng Securities.