PBoC Liquidity Injections Nearly Double to ¥1.5 Trillion on Thursday

iFeng: 央行五日放水超1.5万亿(表)

Only yesterday I posted PBoC Injects ¥790 Billion Over 6 Days.

This is the Chinese New Year cash demand surge. In the article below, one Chinese bank estimates the demand at 2 trillion yuan.

Bloomberg has more: PBOC Turns on the Liquidity Firehose in New Policy Approach
Having spent years outlining the move toward a price-based monetary framework and away from directly channeling credit, the People’s Bank of China is turning to market-based liquidity measures to ease a pre-Chinese New Year cash squeeze and offset capital outflows stemming from its support for the falling yuan. Net injections totaling more than 1 trillion yuan ($152 billion) since mid-January add about the same as a 1 percentage point cut to banks’ required reserve ratios -- the traditional way to boost liquidity.

The difference: RRR cuts are lasting, while injections via reverse repurchase agreements and new lending tools have set time periods. That gives the PBOC more power to manage liquidity by choosing whether or not to roll over funds as they come due.

The newer liquidity tools also carry varying interest rates depending on the time period attached, helping create a yield curve the market can use for pricing other securities. That’s important for a central bank balancing the need to avoid a short-term cash crunch with longer-term plans to rein in the pace of debt expansion.

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