China boosts liquidity injection into banking system before end of month

(Bloomberg) – China’s central bank has increased its injection of short-term liquidity in anticipation of a liquidity crunch before the end of the month.

The People’s Bank of China increased its liquidity injection via reverse repos to 100 billion yuan ($15.8 billion). This resulted in a net injection of 90 billion yuan. The PBOC had drained money over the past two weeks, which is common after the Lunar New Year holiday.

“The net injection is timely given a slight tightening of liquidity in the market with the seven-day repo pegged slightly above the key seven-day rate,” said Winson Phoon, head of research at fixed income securities at Maybank Securities Pte in Singapore.

China’s seven-day repo rate rose to 2.15%, its highest level since Jan. 30, as demand for cash increased towards the end of the month for tax payments.

The cash support also comes at a time of mounting economic challenges for China. Provincial governments across the country on Monday predicted that growth in tax revenue would slow and revenue from land sales would fall, putting them under greater fiscal pressure as they try to spend more to support sluggish growth. .

(Updates with chart and analyst commentary in third paragraph.)

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