The Chinese central bank has made a net injection of 30 billion yuan via open market operations on Thursday, 11 January, for its first liquidity boost in 13 trading days.
The People’s Bank of China is undertaking 30 billion yuan in 7 day repos and 30 billion yuan in 14 day repos for a net injection of 30 billion yuan.
On Wednesday 10 January the Chinese central bank conducted 60 billion yuan in 7 day repos and 60 billion yuan in 14 day repos, precisely offsetting the 120 billion yuan in repo agreements that matured on the same date.
PBOC had previously refrained from conducting any open market operations for a run of 12 consecutive trading days, from 22 December 2017 to 9 January 2018, repeatedly citing ample volumes of liquidity in the Chinese banking system.
According to analysts the prior round of absence from the open market had the goal of “trimming the peaks and filling the troughs,” offsetting the large volume of funds released by the national treasury towards the end of last year.
For this reason analysts say the central bank’s return to open market operations was in consonance with expectations, given that liquidity levels had already returned to moderate levels and PBOC has committed to “prudent and neutral” monetary policy in 2018.
Liquidity in Chinese money markets is set to come under pressure later this month, with 540 billion yuan in repos and 182.5 billion yuan in medium-term lending facilities scheduled to mature from 10 – 20 January, and Chinese tax payments due in mid-January.