PBOC drains most cash in a year from banking system

PBOC drains most cash in a year from banking system

Admin 6 mins ago Banking

Bloomberg

China drained the most short-term liquidity from the banking system in a year on a net basis as it reduced support after a week-long holiday. Government bond futures slid by the most since August. The People’s Bank of China (PBOC) offered 10 billion yuan ($1.6 billion) of short-term funds to lenders, resulting in a net liquidity withdrawal of 330 billion yuan taking into account maturities. The operation broke a pattern where the central bank had added 100 billion yuan on a gross basis each day in the past five sessions. The PBOC had boosted liquidity in the run up to the National Day holidays to ease tightness caused by seasonal demand for cash from banks towards quarter-end. Policy makers may also have felt a need to add funds due to uncertainties surrounding China Evergrande Group. Investors are still waiting for the embattled firm to disclose details of its “major transaction” while another developer’s shock default has stoked contagion fears. “The net drain suggests that China is moving back to normalising policy after significant net injections prior to Golden Week,” said Mitul Kotecha, chief emerging-markets Asia and Europe strategist at TD Securities in Singapore. “Markets will