China’s central bank supplied liquidity to commercial lenders on Monday to help them manage upcoming government bond sales, while leaving the price of the money unchanged as the economy recovers.
The People’s Bank of China (PBoC) added 700 billion yuan ($101 billion) of one-year funding via the medium-term lending facility. The central bank said Friday that today’s operation is meant to offset the 400 billion yuan in loans coming due Monday and another 150 billion yuan maturing on August 26.
With the economy recovering slowly, the PBoC is trying to provide markets enough funding to purchase government bonds and make loans, without fostering financial risks. In addition to Monday’s money, the central bank last week offered the most short-term funds since May, replenishing a banking system which needs about $500 billion this month.
The net injection indicates “a more accommodative stance on keeping liquidity levels ample” so that commercial banks can continue to support bond issuance and to stabilise credit growth, said Liu Peiqian, a China economist at Natwest Markets in Singapore.
The move is “a signal to ensure policy continuity and stability” rather than a reaction to a slower pace of economic recovery, she said.
The PBoC kept the interest rate on the funds unchanged at 2.95 per cent. The yield on China’s 10-year government bonds was little changed at 2.94 per cent. “The medium-term lending facility (MLF) injection is larger than expected,” said Ming Ming, head of fixed-income research at Citic Securities.