June 25, 2015 / 3:17 AM / 4 years ago

China central bank says to moderately increase short-term liquidity

SHANGHAI, June 25 (Reuters) - The People’s Bank of China said it will moderately increase short-term liquidity in the banking system through issuing reverse repos to stabilise market expectations, according to a statement on the central bank’s official microblog.

The PBOC resumed open market operations for the first time Thursday morning, issuing 35 billion yuan ($5.64 billion) in reverse bond purchase agreements, which inject cash for short periods of time.

The move comes as demand for cash has begun to drive up short-term rates in the interbank market, as companies build up capital in preparation for the first-half reporting period.

The PBOC also said that liquidity in the banking system remains ample.

The benchmark seven-day repo rate has been rising steadily since mid-May, and is now trading around 2.8 percent.

In 2013, the interbank market suffered a cash crunch that saw short-term rates spike and stock markets collapse after the central bank held back from injecting adequate liquidity.

$1 = 6.2083 Chinese yuan Reporting by Pete Sweeney; Editing by Kim Coghill

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