China Money Rate Drops Most Since October on Record Injections

  • Central bank net fund additions surge to $164 billion
  • Authority says it offered liquidity support to some lenders

Why the PBOC Offered Temporary Liquidity to Some Banks

China’s one-day money-market rate declined the most in more than three months as the central bank boosted cash injections to a record and offered liquidity support to some lenders.

The monetary authority added 1.13 trillion yuan ($164 billion) to the financial system this week. Demand for money jumps before the Lunar New Year holidays, also known as the Spring Festival, as families prepare to exchange gifts and meet for feasts. The authority said Friday that it provided a 28-day temporary liquidity facility to some major commercial banks.

China’s money-market has drawn global attention in recent months, with the People’s Bank of China guiding short-term interbank rates higher to dissuade people from using borrowed funds to buy assets such as bonds. On a net basis, the central bank has injected 635 billion yuan so far this month, versus 1.2 trillion yuan in January last year.

“The central bank is walking a fine line - it wants to ensure there’s enough liquidity to cover the seasonal demand but on the other hand it doesn’t want to give too much cheap money as controlling financial risks is the priority,” said Chen Long, an analyst at Bank of Dongguan Co. in Guangdong province.

The overnight repurchase rate, a gauge of interbank funding availability, dropped 18 basis points to 2.38 percent as of 4:34 p.m. in Shanghai. It climbed to 2.56 percent on Thursday, the highest since April 2015. The seven-day measure rose two basis points after dropping the most in two weeks in the previous session.

— With assistance by Helen Sun

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