China's Upside-Down Money Market Tests the PBOC's Role
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It’s now cheaper for Chinese financial institutions to borrow from their peers than to seek funds from the central bank -- a situation not seen in nearly three years.
Amid ample central bank liquidity, funding costs in the money market have fallen below the interest rate of seven-day reverse repurchase agreements offered by the People’s Bank of China as eases policy in a bid to shore up the economy. The inversion is the first since September 2015, when the central bank injected large amount of liquidity to stamp out risks rising from a stock market riot.