People’s Bank of China (PBOC) sets yuan reference rate at 6.1184

Author: Eamonn Sheridan | Category: News

First cut to the set rate in 6 days

PBoC said to inject CNY 400bln into banking system (this is from yesterday … more to come ):

Via MNI/eFX yesterday on this story:

  • The People’s Bank of China suspended open-market operations for a fifth consecutive session since the last Thursday of November
  • Investors were expecting the PBOC to use reverse repos to ease tight liquidity in the interbank market
  • It injected a net CNY5 billion into the banking system this week compared with CNY30 billion last week as repos matured
  • The CNY5 billion repo that matured this week was the last outstanding and nothing matures for the rest of the month
  • The CNY500 billion the PBOC lent to big banks in September is set to mature soon and it is unlikely the PBOC will roll all of it over. The stock-market regulator approved another 12 initial public offerings overnight. When these come to market in coming weeks they will require more than CNY1 trillion in subscriptions
  • The fixing of the seven-day repo rose to 3.60% Wednesday — its highest in three and half months and it is expected to rise even more
  • PBOC refusal to add liquidity in open-market operations is fueling speculation it is preparing a big policy move — like cutting bank deposit-reserve ratios
  • Market talk Wednesday that the PBOC has already given China Development Bank CNY400 billion via secret tools sent treasury futures up 0.36%

More (this time via Bloomberg):

  • The PBOC is said to have injected 400b yuan into the interbank market via China Development Bank – Bloomberg citing “according to a person familiar with the matter”
  • Also, this from Yuehong Xu, Shanghai-based senior analyst at Bank of Communications:
  • Money market rates in the interbank market (are higher) following this week’s corporate bond decision by China Securities Depository and Clearing Corp
  • Thus the PBOC may be forced to inject liquidity in order to curb rising rates
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