China's short-term lending rates fell sharply yesterday with the central bank injecting substantial amount of cash into the market to help relieve a liquidity squeeze, even as banks seem to have marshaled enough funds the upcoming long holiday.
The money market is in the grip of an acute cash shortfall over the past several weeks, with banks being hit by waves of deposit withdrawals ahead of the Lunar New Year, the most important Chinese holiday that also happens to be the time of peak consumer spending.
The People's Bank of China (PBOC) conducted a 14-day reverse bond repurchase business worth 183 billion yuan today, injecting cash into the market and having conducted such business every day so far this week.
However, the market was still disappointed at the PBOC's failure to cut the reserve requirements for banks' reserve requirement ratios (RRR).
According to industry experts money market conditions had improved greatly today but worries over longer-term cash calls remained.
They say the market was still gauging whether the PBOC would reduce RRR over the near term, but people appear to have become less certain of such a cut.