The People’s Bank of China (PBOC) was said to have added money to the banking system yesterday as a cash shortage stemming from new share sales drove the benchmark money-market rate up by the most since July.
The central bank supplied funds on a short-term basis, according to two people with direct knowledge of the matter who asked not to be identified.
About 50 billion yuan (US$8.2 billion) was offered using short-term liquidity operations (SLO), Market News International reported earlier yesterday, citing three anonymous sources.
Eleven companies are due to sell shares for the first time next week, seven of them on Monday, and Australia & New Zealand Banking Group Ltd estimates the sales will lock up at least 1 trillion yuan.
The central bank is to provide liquidity support through multiple monetary policy tools when necessary, according to a statement released yesterday on its microblog.
Initial public offerings (IPO) contributed to recent volatility in money markets and the banking system has ample funds, the bank said.
The seven-day repurchase rate, a gauge of cash availability in the banking system, rose as much as 322 basis points, or 3.22 percentage point, to 6.50 percent, according to data from the National Interbank Funding Center.
That is the biggest intra-day jump in eight months.
A weighted average climbed 37 basis points to 3.65 percent as of 3:53pm in Shanghai, the highest level since August. China stocks rallied, with the Shanghai Composite Index advancing 1.4 percent.
“The PBOC clearly has the capacity to bring down money-market rates,” Singapore-based United Overseas Bank Ltd economist Suan Teck Kin said. “But right now, I don’t see the short-term rates coming off significantly as demand for cash is strong in relation to IPOs.”
Trading in the money market was extended by 30 minutes to 5pm on Thursday, according to a press officer at the National Interbank Funding Center (全國銀行間同業拆借中心), who asked not to be named citing agency rules. The person did not give any reason for the extension.
Nanjing Port Co (南京港股份有限公司) canceled a sale of 200 million yuan of 270-day notes on Thursday, citing market volatility.
The PBOC said in January last year that it would use SLOs as an extra tool to manage the cash supply, adding that these would mainly involve the use of repurchase agreements and reverse repos with maturities of fewer than seven days. It named 12 banks, including Industrial & Commercial Bank of China Ltd (中國工商銀行) and Bank of China Ltd (中國銀行), as participants in the operations, which supplement regular open-market auctions held each Tuesday and Thursday.
The central bank delays reporting its use of SLOs by at least a month and the last such announcement was made on March 31 in respect of operations conducted on Feb. 27.
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