(Yicai Global) April 15 -- The People’s Bank of China conducted a routine medium-term lending facility open market operation today, with the winning rate at 2.95 percent, a figure that has remained unchanged for a 13th month in a row.

Analysts believe the rate suggests that the Chinese authorities will maintain stable monetary policies, and that the room for an interest rate hike will be limited in the future.

The central bank injected CNY150 billion (USD23 billion) into the banking system via one-year medium-term lending facility this morning. The operation aimed to offset CNY100 billion of maturing MLF loans due today and CNY56.1 billion worth of targeted medium-term lending facility expiring on April 25, according to a PBOC statement.

Zhou Maohua, an analyst at China Everbright Bank’s financial markets department, told Yicai Global that the PBOC’s MLF operation this month reflects the regulators’ recognition of the current interest rate level. The goal of its open market operations is to ensure reasonably sufficient liquidity and a stable supply of capital.

Wang Qing, chief macro analyst at Golden Credit Rating International, also believes that in the context of this year’s emphasis on “well-timed regulation” of macro policy, the PBOC has kept the MLF rate unchanged and injected another CNY150 million this month. This means that the current market has reasonably abundant medium- and long-term liquidity.

The room for market rates to rise in the future will be quite limited, Wang said. 

“Major market interest rates have risen to the same or slightly higher than the policy level,” he said. “Without an expected increase in the policy rate, this implies that the room for market interest rates to rise in the second quarter will be limited. For example, the benchmark 10-year Treasury yield is not likely to exceed 3.5 percent.”

On the other hand, Wang pointed out that with the arrival later of the peak in local government special bond issuance, the market’s medium- and long-term liquidity will tighten. The PBOC may keep the MLF rate unchanged while injecting more in financial institutions next month or in June.

The PBOC created the MLF in 2014 to provide liquidity support to qualified commercial banks focusing on economic activities in small cities or rural areas. It usually carries out such operations once or twice a month.

The Targeted Medium-term Lending Facility is a special type of MLF, which provides liquidity to qualified large commercial banks to specifically provide loans to targeted small and micro businesses. Its rate is usually several percentage points lower than the MLF, while its term is usually longer than that of the MLF.

Editors: Tang Shihua, Peter Thomas