SHIBOR drops towards normal levels thanks to massive PBOC intervention

SHIBOR surged in the run-up to Spring Festival, but it is easing just as rapidly:

SHIBOR is important to watch for signs of stress in the Chinese banking system. While this move is seasonal, the central bank was forced to step in and provide liquidity this year. China's money rates slump after PBOC injects money
The People's Bank of China conducted 14-day reverse bond repurchase business worth 183 billion yuan ($29 billion) on Thursday, continuing to inject cash into the market and having conducted such business every day so far this week.
SHIBOR did not fall until today, which means the first three days of repurchases failed to ease the market.

One thing I forgot to note in the previous article, something not mentioned in the Bloomberg article I linked to but was mentioned in the Chinese press, was that this move was the first in 5 years (see 央行近5年来首次逆回购 回笼日或是降准窗口期). So now we have a move not conducted in 5 years, carried out for 4 straight days. Shades of the declining yuan......Another article (央行今年首次启动14天逆回购) pointed out that this was the first time in 10 years the PBOC announced their move—although as we subsequently learned, there were repurchases all week and not all were announced.

巨量逆回购显著舒缓资金面紧绷 This Chinese article pegs the total repurchases at around 500 billion renminbi, or almost $80 billion.

This was orginally posted at 2:44 PM Beijing time. It is republished due to significant updates.

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