(Yicai) July 24 -- The People’s Bank of China has added a net CNY800 billion (USD118.12 billion) of liquidity into the market this month, ending four straight months of net withdrawals.

The bank carried out a CNY500 billion one-year medium-term lending facility operation today. With CNY400 billion in MLF loans maturing in July, that represents a net injection of CNY100 billion, marking net MLF additions for the third straight month.

Combined with net injections of CNY500 billion via a six-month open market operation and CNY200 billion via three-month instruments, the total net addition this month amounts to CNY800 billion.

The net MLF injection aligned with market expectations, said Ming Ming, chief economist at Citic Securities. He noted that the benchmark rate for certificates of deposit remained relatively stable in the second half of July, reflecting manageable long-term liability pressure on commercial banks, and this explaining why the MLF addition dropped by CNY100 billion from last month, Ming added.

The resumption of net injections in July will help to maintain ample market liquidity, prevent spikes in market interest rates, and stabilize market expectations, according to Wang Qing, chief macro analyst at Golden Credit Rating International.

Net government bond financing is expected to reach around CNY1.3 trillion (USD191.94 billion) this month, up about CNY400 billion from June, Wang noted, adding that the net liquidity injection will support the smooth sale of these bonds, demonstrating the coordination of monetary and fiscal policies.

Tan Yiming, chief fixed income analyst at TF Securities, cautioned that it was unlikely that the net injection signaled a return to the previous extremely loose liquidity conditions.

In the first half of this year, the rate of government bond issuance and credit growth both slowed, leading to more funds staying in the banking system, Tan said, but bond sales will gather pace on this half, and the real economy will have more room to absorb liquidity.

PBOC Vice Governor Zou Lan has said that the central bank will maintain ample liquidity by appropriately selecting and combining tools such as the reserve requirement ratio, reverse repurchase agreements, MLF operations, and treasury bond trading.

Ming expects monetary policy tools to remain supportive as government bond sales are stepped up this quarter. Tan suggested that investors should place less emphasis on the absolute size of liquidity injections, as improving precision in the PBOC’s liquidity regulation means market rate signals may provide a more meaningful indicator.

Editor: Tom Litting