The Chinese central bank has made net injections of 280 billion yuan this week via open market operations, after expanding liquidity by 510 billion yuan the preceding week.
The open market office of the People’s Bank of China reported on 28 July that it had undertaken 100 billion yuan in 7-day repo agreements and a further 40 billion in 14-day repo agreements that day.
Given the offsetting impact of the maturation of 100 billion yuan in repo agreements on the same date PBOC made net injections of 40 billion yuan on Friday, bringing total monetary injections for the week up to 280 billion yuan, for a sizeable decline compared to 510 billion yuan last week.
Analysts say that that funds are continuing to tighten as the end of the month approaches, with increasing demand for funds with 7-day instruments.
On the preceding trading day the overnight Shibor rose 0.0610 basis points to 2.7860% – its highest level in seven months.
The 7-day Shibor increased 0.0136 percentage points to 2.8626%, while longer-term rates all saw declines.
A report from BOC International points out that the impact of tax payments this month has already relented, and while rates may have risen, difficulties accessing funds have eased considerably.
BOC International sees liquidity returning to an improvement corridor as the impacts of seasonal tax payments, government bond payments and maturing central bank repos and medium-term lending facilities upon liquidity subsides.