PBOC Says It Will Ensure Stability of China Money Market - Bloomberg

PBOC Says It Will Ensure Stability of China Money Market - Bloomberg

China’s central bank said it will keep money-market rates at a “reasonable” level and seasonal forces that have driven them up will fade.
The People’s Bank of China has provided liquidity to some financial institutions to stabilize money market rates and will use short-term liquidity operation and standing lending facility tools to ensure steady markets, according to a statement posted to its website today. It also called on commercial banks to improve their liquidity management.
The statement is the first public confirmation of central bank action to ease a cash squeeze that sent China’s overnight repurchase rate to a record last week and came hours after Ling Tao, deputy head of the PBOC’s Shanghai branch, said liquidity risks were controllable. Premier Li Keqiang is seeking to wring speculative lending out of the nation’s banking system after credit expansion outpaced economic growth.
The PBOC is giving the market “a pill to soothe the nerves,” Xu Gao, Everbright Securities Co.’s Beijing-based chief economist. “The message is clear: the central bank doesn’t want to see a tsunami in China’s financial markets and market rates will drop further.”