SHANGHAI (Reuters) - Cash injection through reverse repo operations in China and funds released from cuts to the reserve requirement ratio (RRR) were “meant to keep banking system liquidity reasonably ample”, China’s central bank said on Tuesday.
The People’s Bank of China (PBOC) added that it expects liquidity in the banking system to reduce rapidly in coming days as the market has entered a peak period of tax payments.
The PBOC announced earlier this month that it was cutting the ratio of cash that banks must hold as reserves by 100 basis points (bps), with the first stage of 50 bps reduction effective on Tuesday. And the freed up funds will be used to repay some maturing medium-term lending facility (MLF) loans.
On Tuesday, the PBOC injected 80 billion yuan ($11.86 billion) through 7-day reverse repos and 100 billion yuan via 28-day tenor, while a batch of 390 billion yuan worth of one-year MLF was set to mature on the same day. [CN/MMT]
The central bank said it will not roll over such MLF loans maturing in the first quarter of 2019.
($1 = 6.7457 Chinese yuan)
Reporting by Winni Zhou and Andrew Galbraith; Editing by Shri Navaratnam