China central bank drains record 164 bln yuan in open market operations
Tuesday, February 7, 2006 5:39:32 AM
afxpress.com
BEIJING (AFX) - The People's Bank of China said it drained a total of 164 bln yuan from the banking system via the sale of bank bills and repurchase agreements, setting a new record for a single day's open market operations
In a statement carried on its website, the central bank said it sold 120 bln yuan in one-year bills with a yield of 1.8330 pct, slightly lower than the yield of 1.8537 pct in a similar sale on Jan 17
The central bank also drained 44 bln yuan in 7-day repos, with the yield at 1.55 pct
The major liquidity tightening exercise follows a run of record daily withdrawals of funds from the system through the issuance of bank bills and repurchase agreements
The previous high saw the central bank issue 95 bln yuan in one-year bills on Jan 10
The central bank temporarily eased its tightening moves before the Lunar New Year, when it bought 14-day repos from the banks to cover them for customer draw-downs over the holidays
Those repos also mature today, reversing the flow of funds to the lenders and returning it to the central bank, according to Xinhua
Xinhua projected a resumption and possible strengthening in the PBOC's sterilization efforts. "The big move to drain liquidity from the market may be just the beginning for the central bank," it said
Broad M2 money supply accelerated through 2005, supported by a surge in trade earnings, steady foreign direct investment, and speculative flows betting on a further appreciation of the Chinese currency
In response, the central bank, which officially pursues a "prudent" monetary policy, has become more aggressive about soaking up the extra funds rather than risk poor lending decisions by cash-rich state banks and overheating in sectors such as real estate
The central bank paused its sterilization campaign only briefly late last year when it suspended the issuance of three- and six-month bills to allay the concerns of lenders who felt that interbank rates had risen too high too quickly
The PBOC said on Sunday that three-month bill issuances will resume on Thursday but gave no word on future sales of six-month bills. (1 usd = 8.1 yuan) |
