China injects $7.2 billion into banks

February 10, 2015 09:15 AM

The People’s Bank of China injected a net ¥45 billion ($7.2 billion) into the financial system Tuesday to meet demand for cash before the Lunar New Year holiday and initial public offerings.

The monetary authority sold reverse-repurchase agreements to add the cash, following three straight weeks of similar operations that injected a net 195 billion yuan. The PBOC added ¥450 billion in the two weeks before the holiday last year.

China’s central bank is injecting money as depositors in the world’s second-largest economy withdraw cash to pay for gifts and food before the weeklong holiday that starts on Feb. 18. Stock investors will place about ¥2.05 trillion of bids for IPOs this week, according to a Bloomberg survey of analysts.

“Funding demand due to IPOs is tightening liquidity,” said Wang Ming, chief operations officer at Shanghai Yaozhi Asset Management LLP.

The seven-day repurchase rate, a gauge of interbank funding availability, rose for the first time in four days, increasing four basis points to 4.37%, a weighted average from the National Interbank Funding Center shows.

The monetary authority sold ¥55 billion of 21-day reverse-repurchase agreements and ¥25 billion of 14-day contracts, it said in a statement on Tuesday. ¥35 billion of the agreements will mature, leaving a net addition of ¥45 billion so far this week.

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