As banks sat on cash in preparation for meeting year-end capital requirements and money market rates reached their highest level since October, word came Wednesday that the People’s Bank of China may cancel a scheduled weekly Thursday sale of three-month bills.
According to a Bloomberg report, People’s Bank has held such a sale every Thursday since the weeklong National Day holiday in October, but on Wednesday it did not even gauge demand for such a sale, according to two anonymous trader sources.
Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender, was quoted saying, “It’s probably a temporary suspension because of the cash crunch. The central bank may cut the reserve requirement ratio before the Lunar New Year to add liquidity to the financial system.”
He added that altogether, 13 billion yuan ($2.1 billion) of central bank bills and repurchase contracts will mature this week; that is down from 17 billion yuan last week. In the five days beginning Jan. 2, the bill redemption will rise to 51 billion yuan, Chinas markets will be closed Jan. 2 and 3, and also for a week beginning Jan. 23.