China’s Growing Bond Market Stress Puts PBOC Operation in Focus
- PBOC seen rolling over 500 billion yuan policy loans Thursday
- Interbank liquidity is under pressure into year-end, UBS says
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A reopening-led rout in China’s bond market is pushing up borrowing costs for banks, increasing focus on Thursday’s central bank plans to ensure there is enough cash in the financial system for the medium-term.
While short-term money market rates stay anchored thanks to the People’s Bank of China’s reserve requirement ratio cut last month, the rate on one-year negotiable certificates of deposits has jumped due to heavy retail redemptions. The yield of around 2.7% on the notes is just five basis points below the PBOC’s one-year MLF rate, which means it’s becoming more attractive for lenders to borrow from the central bank.