The People’s Bank of China has used open market operations to make net injections of liquidity for the seventh consecutive day.
On 25 July PBOC used yield auctioning to launch 140 billion yuan in repo operations, comprised of 100 billion yuan in 7-day contracts with rates of 2.45% and 40 billion yuan in 14-day contracts with yields of 2.60%.
The day previously PBOC engaged in 340 billion yuan of repo operations – the highest single day volume since June 16, comprised of 200 billion yuan in 7 day contracts and 150 billion yuan of 14-day contracts, for net injections of 220 billion yuan.
Last week PBOC launched a succession of injections via repo operations in order to offset seasonal liquidity fluctuations due to July tax payments, as well as a wave of maturing repos agreements and medium-term lending facilities.
PBOC made net injections of 510 billion yuan last week, compensating for the maturation of 130 billion yuan in repo agreements and 138.5 billion yuan in MLF’s.
According to market observers the hefty injections signal the central bank’s determination to maintain liquidity, even amidst its ongoing deleveraging drive, with further operations expected before the months end.
540 billion in repo agreements are scheduled to mature this week onto of 137.5 billion yuan in MLF’s.
“The PBOC is expected to increase injections towards the end of the month to continue its efforts to maintain market stability,” said Shenwan Hongyuan Group Co. economists in a note released on Monday.
“Hence it is unlikely there will be unexpected volatility in money rates.”