The People’s Bank of China has suspended the sale of repurchase agreements for the first time in four months, marking a pause in its efforts to mop up excess liquidity in the market, the Hong Kong Economic Journal reported Friday.
Analysts expect the central bank will soon resume sales of reverse repurchase agreements, a means to inject liquidity into the market, as capital inflows decline.
The PBoC’s move signals a more flexible monetary stance, considering that liquidity levels usually get tougher around the end of June, said Xu Hanfei, chief bond analyst at Guotai Junan Securities Co. Ltd.
The move is also consistent with the fact that only 30 billion yuan (US$4.82 billion) of repo agreements will have matured this week and be released back to the market.
China Merchants Securities Co. Ltd. (600999.CN) said the central bank’s relatively loose stance is another proof of the government’s commitment to ensuring growth.
Yet, it is unlikely that the PBoC will announce anytime soon an across-the-board cut in the lenders’ reserve requirement ratio, which may result in heightened market risks, the state-owned People’s Daily said in an editorial.
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