China PBOC Halts Open-Market Operations First Time Since March

China’s central bank refrained from draining funds from the financial system for the first time in three months after a cash squeeze pushed up the overnight money-market rate to an all-time high.

The People’s Bank of China hasn’t offered repurchase contracts or bills today, according to two traders required to bid at the auctions. Two calls by Bloomberg News to the PBOC’s media office went unanswered. The central bank has held repo operations every week since February to drain cash and resumed sales of bills in May for the first time since December 2011.

The overnight repo rate, which measures interbank funding availability, touched 9.78 percent on June 8, the highest since May 2006, when the National Interbank Funding Center started compiling the weighted average. China’s financial markets were shut in the first three days of the week for the Dragon Boat Festival holiday. The rate was at 6.32 percent as of 10:39 a.m. in Shanghai today, little changed from June 9. The seven-day repo rate dropped 34 basis points to 5.63 percent.

“If the PBOC sold repos or bills today, the market would have collapsed,” said Liu Junyu, a bond analyst at China Merchants Bank Co., the nation’s sixth-biggest lender. “The cash shortage hasn’t eased and banks are still busy borrowing money.”

Open-market operations are usually conducted every Tuesday and Thursday and were last suspended on March 5. The halt is probably temporary, said Liu.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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