China's central bank on Tuesday injected fresh funds via its medium-term lending facility (MLF) in an attempt to ease a seasonal liquidity strain.
The People's Bank of China pumped 498 billion yuan (73.3 billion U.S. dollars) into the financial system via MLF. The interest rate for one-year MLF loans was unchanged at 3.20 percent, the central bank said in a statement on its website.
But it skipped daily reverse repo sales on Tuesday, the first suspension since May 27.
The MLF tool was first introduced in 2014 to help commercial and policy banks maintain liquidity by allowing them to borrow from the central bank by using securities as collateral.
The central bank-affiliated newspaper, the Financial News, said in a report at the end of May that the central bank would inject funds via the MLF in early June to ease concerns about liquidity conditions in the market.
Interbank market money rates had been climbing over the past weeks because of the liquidity strain ahead of quarterly regulatory reviews and tax payments.
In Tuesday's interbank market, the overnight Shanghai Interbank Offered Rate, which measures the cost at which banks lend to one another, rose 2.52 basis points to 2.8419 percent. The rate for one-month loans increased 8.03 basis points to 4.3633 percent, the highest level in more than two months.
Maturing reverse repos will drain a total of 470 billion yuan from the market this week, while another 224.3 billion yuan will be drained due to maturing MLF.
