(Yicai Global) Feb. 13 -- China's central bank the People's Bank of China skipped open market operations for the third day in a row today, thereby continuing to withdraw cash from its monetary system.
Liquidity in the banking system is ample enough to offset maturing previous reverse repurchases and medium-term lending facility loans, PBOC said in a press briefing explaining today's decision.
MLF loans are one of the several tools the central bank wields to manage monetary policy and lending. They were introduced to provide banks with funds as authorities intensify efforts to support lending to select economic sectors, rather than just topping up liquidity in the overall financial system.
Since CNY270 billion in previous reverse repos and 383.5 billion MLF loans mature today, the move, in effect, drains that amount of cash out of the market.
Despite the central bank not having infused fresh cash into the market for three straight days, the market interest rate continued to move down today, reflecting its brimming liquidity.
The overnight Shanghai Interbank Offered Rate fell 29.5 basis points to 1.7220 percent. The one-week term rate was down 15.1 basis points to 2.3620 percent, and that for three-month loans also dropped 2 basis points to 2.8520.
The PBOC injected funds into the market last month through cuts in commercial banks' required deposit-reserve ratios and MLF loan grants, as well as reverse repo operations, to decant an abundance of cash to satisfy strong pre-holiday demand.
Editor: Ben Armour