BEIJING — China’s central bank drained liquidity from the financial system on Dec 26.
The People’s Bank of China (PBOC) conducted 20 billion yuan (about $2.9 billion) of seven-day reverse repos at an interest rate of 2.55 percent and 10 billion yuan of 14-day reverse repos at 2.7 percent, according to a PBOC statement.
The PBOC said the operation was aimed to stabilize capital supply at the end of the year and maintain reasonably affluent liquidity in the banking system.
As reverse repos worth 40 billion yuan matured on Dec 26, the PBOC effectively withdrew 10 billion yuan of funds from financial institutions.
Through reverse repos, the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.
On Dec 26, the volume-weighted average of the benchmark 14-day repo rate traded in the inter-bank market was up 148 basis points, the strongest rise in five years.