China’s Central Bank Injects Record Funds to Ease Cash Crunch

China’s central bank added a record 290 billion yuan ($46 billion) to the financial system using reverse-repurchase agreements, seeking to address a cash squeeze in the run-up to a weeklong holiday.

The People’s Bank of China conducted 190 billion yuan of 28-day reverse repos and offered 100 billion yuan of 14-day contracts, according to a trader at a primary dealer required to bid at the auctions. Today’s total is the highest for a single day in Bloomberg data going back to 2004.

The Chinese flag flies outside the headquarters of the People’s Bank of China in Beijing.

“Record amounts of reverse repos are to meet the surge in cash demand before the quarter-end and the holidays,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “As the central bank steps up adding funds through reverse repos, it’s unlikely to cut the reserve ratio this month.”

The seven-day repurchase rate, which measures interbank funding availability, gained 22 basis points to 4.73 percent as of 11:07 a.m. in Shanghai, the highest level since June 28, according to a weighted average compiled by the National Interbank Funding Center.

The central bank kept the yields on 28- and 14-day reverse repos unchanged at 3.6 percent and 3.45 percent, respectively, the trader said. China’s financial markets will be shut from Oct. 1 to Oct. 5 for the National day and mid-autumn holidays.

Via – Bloomberg

 

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