The People's Bank of China, the country's central bank, once again suspended its scheduled weekly sale of three-month bills and did not conduct repossessions Thursday, in a move apparently aimed at easing liquidity to the money market as a large amount of reverse repurchase agreements are due to mature this week.
This is the fourth straight week the central bank has skipped routine offerings of bills and repurchase agreements.
A total of 352 billion yuan (US$55.60 billion), which the central bank injected into the market via reverse repossessions before the Spring Festival, will mature this week, while 1 billion yuan from the central bank bill is set to mature this week. So, the central bank has drained 351 billion yuan from the money market this week.
The central bank conducts auctions of one-year-old bills Tuesdays and three-month-old bills Thursdays, as well as three-year-old bills every other Thursday in order to control the amount of liquidity in the money market.
"Obviously, the central bank wants to continue to stabilize the liquidity condition on the money market by suspending open market operations twice this week," E Yongjian, a researcher with the Bank of Communications in Shanghai, told the Global Times.
Earlier, the market expected the central bank would cut the banks' reserve requirement ratio (RRR) before the Spring Festival to ease the liquidity strain in the money market, but the cut has not yet materialized.
The continuous open market operations in recent weeks by the central bank to ease liquidity fueled market speculations the central bank may continue putting off the RRR cut.
"Although the central bank may delay cutting the RRR while choosing to issue reverse repossession agreements to ease tight liquidity, in the mid-and long-term, there is a possibility for the central bank to make multiple RRR cuts this year," Peng Wensheng, chief economist of the China International Capital Corporation, told the Global Times.
"The fact the central bank did not cut the RRR before the Spring Festival implied that the monetary policy easing will be done gradually," he said.
