The People's Bank of China injected funds into money markets today, increasing liquidity, using both 7-day and 14-day reverse repos
- Mike sounded the warning bell during the Chinese afternoon yesterday: PBOC gauges demand from financial institutions for 14-day repos
- And, at the yuan fix today we got the news the bank had indeed injected funds using the 14-day instruments: In Open Market operations, the PBOC inject 90bn yuan through 7-day reverse repos AND 50bn with 14-day reverse repos
- PBOC using 14-day reverse-repurchase agreements for the first time since February
- Amid speculation policy makers are looking to increase the use of more expensive, longer-term funding to cool a bond rally.
- "The offering of long-term funds seems to be sending a signal to warn market participants not to get excessively leveraged," said Liu Changjiang, a bond analyst at Soochow Securities Co. in Shanghai. "The follow-up impact hinges on what the PBOC plans to do next - whether it will continue to offer 14-day reverse repos and any other policies - so the market can gauge its determination."
Indeed, again today the PBOC gauged demand for another round of 14-day reverse repos (along with 7-day) for more tomorrow. Stay tuned ...