Chinese central bank bans bill sales ahead of Lunar New Year
The People’s Bank of China will suspend sales of its three-month bills ahead of the Lunar New Year holiday on Jan. 23.
The central bank will conduct reverse-repurchase operations based on demand, according to the bank’s website. It added a net 51 billion yuan ($8.1 billion) to the banking system last week, the biggest increase in eight weeks, to help stanch an increase in money-market rates as banks hoard cash before the week-long holiday starts on Jan. 23.
“This will ensure a continued positive flow of cash to the interbank market in this period of tight liquidity,” said Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong. “We still expect a reserve-ratio cut before the Lunar New Year.”
The monetary authority will boost the availability of cash by cutting lenders’ reserve requirements before the holiday, economists at Barclays Capital and Bank of America Corp. predict. The central bank cut the amount of cash that lenders must set aside as reserves for the first time since 2008 last month as Europe’s debt crisis dimmed the outlook for exports and growth.
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Tags: People’s Bank of China, three-month bills, Lunar New Year
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