China's central bank allowed 10 billion yuan net (1.54 billion U.S. dollars) to drain from money markets on Tuesday as previously issued reverse repurchase agreements (repo) matured.
The People's Bank of China conducted 20 billion yuan in reverse repos on Tuesday, but with 30 billion yuan worth of reverse repos maturing the same day, the central bank ended up draining a net 10 billion yuan for the day. This follows a drain of 20 billion yuan from the financial system on Monday.
This show liquidity has been improving after the central bank cut the reserve requirement ratio for commercial banks by 0.5 percentage points on March 1, analysts said.
The gradual stabilization of the yuan and easing capital outflow pressure also give the central bank a good reason to slow injecting money into the financial system.
On the sidelines of the country's annual parliamentary session, central bank governor Zhou Xiaochuan said Saturday that the yuan has started to return to its normal and reasonable level after volatility.
On Tuesday's interbank market, the benchmark overnight Shanghai Interbank Offered Rate (Shibor), which measures the cost at which Chinese banks lend to one other, rose by 0.4 basis points to 1.953 percent.
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