A total of 560 billion yuan in the Chinese central bank’s repo agreements are due this week, triggering market trepidations about near-term liquidity.
Data from Bloomberg indicates that the 560 billion yuan in repo agreement maturing this week will consist of 240 billion yuan in 7 day repo and 320 billion yuan in 14 day repos, including
100 billion yuan in 7 day repos and 100 billion yuan in 14 day repos on 28 August;
40 billion yuan in 7 day repos on 29 August;
100 billion yuan in 7 day repos on 30 August and 130 billion yuan in 14 day repos on 30 August.;
40 billion yuan in 14 day repos on 31 August, and;
50 billion yuan in 14 day repos on 1 September.
Xu Hanfei, chief fixed income analyst at CMSC, said to Bloomberg that as the impact on liquidity of fiscal deposits relents, the People’s Bank of China is launching net withdrawals via open market operations in order to tighten capital availability.
Given the release of greater liquidity in September due to shift in fiscal deposits, PBOC is expected to continue tightening the money supply next month, while its second quarter monetary policy report would imply a shift to longer term repos.