New PBOC Money-Market Tactic Has Traders Trying to Decode Signal

A pedestrian walks through the central business district of Beijing.

Photographer: Tomohiro Ohsumi/Bloomberg

China’s central bank watchers have something new to puzzle over.

  • The People’s Bank of China sold 50b yuan ($7.5b) of 14-day reverse-repurchase agreements on Wednesday, its first offering of anything with a tenor other than seven days since February. * Officials are signaling they’re ready to curb leverage in the bond market by making it less profitable for investors borrowing to buy 10-year debt, according to Oversea-Chinese Banking Corp. and Haitong Securities Co.
  • For Natixis SA though, the move shouldn’t be interpreted as anything other than an effort to build out a short-term yield curve.
  • The diverging views come after an almost six-month stretch where policy makers managed financial-system liquidity through open-market operations rather than by cutting the benchmark interest rate or by lowering bank reserve requirements.
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