China injects biggest daily amount of funds to banking system

To ease a liquidity thirst before a week-long holiday injected the largest daily amount of money into the banking system via open market operations.

"Banks now have a strong need for liquidity," said He Yifeng, a senior bond analyst at Hongyuan Securities. "They are preparing for more cash withdrawals and purchases of foreign currencies during the coming holiday, while they also need to keep more deposits" for book-keeping purposes.

The People's Bank of China conducted 190 billion yuan of 28-day reverse repurchase and 100 billion yuan of 14-day contracts, according to its statement.

The PBOC set an interest rate of 3.45 percent for 14-day contracts and 3.6 percent for 28-day ones, flat from previous weeks, that banks should pay for the funds.

Analysts said the measure is to ease liquidity pressure at the end of the quarter, and signaled the PBOC will not cut reserve requirement for banks in the short term.

The incessant open-market operations signaled the central bank is favoring more delicate monetary tools to support liquidity and that it is reluctant to resort to blunter monetary instruments such as reserve requirement ratio, said Zhang Mo'nan, a researcher at the National Information Center, a government think tank.

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