The earlier cash-injection from the PBOC, in the form of seven-day CNY13 billion reverse-repo is being viewed as more of a symbolic effort form China’s central bank then a serious effort to alleviate cash shortage:
- while welcome the amount is negligible relative to the volume of market trading,
- and also small compared to the 102.5 billion yuan drained from the banking system in the last two weeks
- Also of concern is today’s reverse repos were conducted at a yield of 4.1%, higher from the 3.9% when the agreements were last made available on October 15
It appears the intent is as a signal that the PBOC is still tightening, but will not let the market descend into high-rate chaos as in June.
China stocks are lower, as is the AUD.
