The People’s Bank of China (PBOC) has suspended open market operation (OMO) for the fifth trading days on Wednesday. It announced that there’s no OMO on July 11 as liquidity volume of banking system is relatively high which can meet the capitals of reverse repo which are to mature. It drained a net of 40 billion yuan from the market as reverse repo worth the same amount matured.
The market liquidity has been relatively loose since July. The central bank has totally drained 570 billion yuan this month. Liquidity is tightened marginally. Interest rates for short-term lending surged significantly yesterday. Overnight rate of Shanghai interbank offered rate (Shibor) rose by 31.7 basis points to 2.308 percent. The 7-day Shibor moved up by 5.5 basis points to 2.657 percent. Weighted average interest rate of 7-day reverse repo of depositing institutions picked up slightly to 2.6451 percent.
Increase in fiscal deposits in July, first month of the third quarter, may withdraw certain liquidity. Meanwhile, there may be more rate payment, but cut in reserve requirement ratio (RRR) will make less rate payment in the month. Funds outstanding for foreign exchange are expected to be changed little, exerting limited influence on liquidity.
It is worth noting that, the leverage ratio of non-bank financial institutions rose in June, according to calculations of relevant data published by China Central Depository & Clearing Co., Ltd. and Shanghai Clearing House. Statistics made by fixed-income research team of Industrial Securities show that the leverage ratio of securities companies, general funds and insurance rose, while the leverage ratio of national big banks, rural/urban commercial banks dropped in June. Commercial banks further lower leverage amid obviously eased debt pressure, and they may also do so in consideration of macro-prudential assessment (MPA).
Source: Shanghai Securities News | Translated by Vanessa Chen
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