PBOC Suspends Repos, Lowers 3-Mth Bill Issues

飞雪寒冰

China's central bank suspended the sale of repo agreements on June 23 and issued fewer three-month bills than usual to boost liquidity as China's stock markets brace for the return of initial public offerings.

On June 25, People's Bank of China issued 50 billion yuan worth of three-month bills, less than its weekly issuance of 80 to 90 billion yuan in the previous two months.
Interest rates on seven-day repo agreements rose to 1.4 percent on June 24 from 0.95 percent on June 17.

"Currently, the liquidity is mainly concentrated with the large banks. Those large banks are retaining more liquidity for the resumption of IPOs," a commercial banker who declined to be identified said.

The suspension of regular repo operations was the first time since December 2008. Normally the PBOC repurchases one- or three-month bills every Tuesday to drain liquidity.

飞雪寒冰

The week's operations resulted in net liquidity rising by 115 billion yuan - that is, 165 billion yuan in central bank bills and repo agreements that matured minus 50 billion in new three-month bills issued.

On June 18, Guilin Sanjin Pharmaceutical Co. won final approval to list on the domestic stock market on June 29, the first company approved for an A-share initial public offering in over nine months.

Zhejiang Wanma Cable Co. the second approved for an IPO, will list on July 2.