PBOC Conducts First Open Market Operations This Week, Still Pulls USD36 Billion From Banking System
Tang Shihua
/SOURCE : Yicai
PBOC Conducts First Open Market Operations This Week, Still Pulls USD36 Billion From Banking System

(Yicai Global) Dec. 6 -- China's central bank, the People's Bank of China (PBOC), resumed open market operations today after a three-day hiatus, issuing medium-term lending facilities (MLF) to match those maturing.

PBOC lent CNY188 billion (USD28.4 billion) to several Chinese banks via one-year MLFs at a bid rate of 3.2 percent today, the same rate as its last such operation. The move follows four consecutive days of balanced operations early last week, and three straight days of net cash withdrawn.

Overall, the bank still withdrew CNY240 billion of cash out of the banking system by allowing reverse repos to mature. Under such operations, the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.

MLF loans are one of several tools the central bank uses to manage monetary policy and lending. They have provided selected banks with funds since authorities stepped up efforts to support lending to certain sectors, rather than adding liquidity to the overall financial system. Another CNY187 million of MLF loans will mature on Dec 16.

PBOC's MLF operations usually match the value of those maturing that month, today's less-than-usual cash injection implies the central bank believes there is already ample liquidity in the banking system, its own news outlet Financial News reported today.

The Shanghai interbank offered rate (SHIBOR) for three-month loans ended its 41-day rising streak, falling 0.71 basis points to 4.7830 percent.

The overnight rate was down 0.6 basis points at 2.5730 percent and the one-week rate dropped by 1.20 basis points to 2.7670 percent.

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Keywords: Pboc , Open Market Operation , Cash Injection , Reverse Repo , Shibor , MLF