China’s central bank stepped up cash injections via open-market operations as a resumption of new share sales drove demand for funds.
The People’s Bank of China (PBOC) sold 50 billion yuan (US$7.8 billion) of seven-day reverse-repurchase agreements yesterday, more than the total of 30 billion yuan last week.
Twenty-eight initial public offerings, including 10 this week, will lock up 3.4 trillion yuan of funds, according to a Bloomberg survey.
Subscriptions that started on Monday drove the overnight money rate to its highest level in a month.
“This is a pre-emptive measure by the central bank to ensure liquidity is ample during the IPOs,” Shanghai-based China Merchants Bank Co (招商銀行) analyst Wan Zhao said. “The money market tightened slightly yesterday and the PBOC wants to maintain the stability.”
The one-day repurchase rate, a gauge of interbank funding availability, fell one basis point to 1.77 percent as of 4:42pm in Shanghai, according to National Interbank Funding Center prices.
The overnight repo rate traded on the Shanghai Stock Exchange jumped 186 basis points, the most since Nov. 6, to 2.39 percent.
The real challenge comes today, when institutions need to borrow a lot of money to deposit funds and then the liquidity crunch will ease on Friday, Shanghai-based CFETS-ICAP International Money Broking Co analyst Frank Sun wrote in a note on Monday.
The yield on government bonds due on October 2025 rose one basis point to 3.06 percent, according to National Interbank Funding Center data.
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