Pump another $60 billion into the Treasury next week
To cope with liquidity constraints, mainland regulators have injected capital into the market through multiple channels. The ministry of finance announced yesterday that it would conduct a three-month cash deposit operation with the central Treasury on Tuesday. It was also reported that the central bank yesterday provided up to rmb50bn in financial support to Banks including bank of China, China development bank and industrial bank through the short-term liquidity adjustment facility (SLO).
Yesterday morning, the reverse repo rate of government bonds on the Shanghai stock exchange soared, with the one-day reverse repo rate of Shanghai government bonds rising 455.4% to 772 basis points, and the 4-day reverse repo rate of Shanghai government bonds jumping 242% to 520 basis points. The people's bank of China offered SLO to bank of China, China development bank and industrial bank of China, according to Market News International (MNI), citing three sources. However, the bank of China said in a statement yesterday that it had not raised funds in the near term. Industrial bank on Thursday denied market reports that it was "short of money," saying as of 5 p.m. Thursday, the bank had excess reserves of more than 60 billion yuan, with excess reserve ratio of more than 1 percent and liquidity under control. The central bank said on its microblog that China's banking system is currently awash in liquidity and will provide timely liquidity support through a variety of monetary policy tools when needed.