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China ShortTerm Rate near 6Year High on Holiday Demand

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One of Chinas key shortterm money rates surged to a near sixyear high on Wednesday as investors worried that policymakers may be starting to shift to a tighter stance to cool gains in share prices and property markets.

Unlike the past few years, the central bank has not been making net liquidity injections into the banking system to meet strong demand for cash heading into the long Lunar New Year holiday. In fact, it has been draining funds, catching traders by surprise.

The holiday starts on Feb. 11 this year.

On Wednesday, the volumeweighted average rate of Chinas benchmark overnight repurchase agreements, or repo, traded in the interbank market climbed to 2.9930 in afternoon trade, up 21.84 basis points on the day and the highest since April 1, 2015.

The sevenday repo jumped to 6.0, its highest since June 27, 2018.

Chinas major stock indexes had surged more than 4 this month before pulling back in the last few days.

Cash conditions are very tight today, said a trader at a foreign bank.

Investors have given up on hopes for highprofile liquidity support before Lunar New Year.

The Peoples Bank of China PBOC injected 180 billion yuan 27.86 billion via open market operations earlier in the session, in contrast to a minimal daily 2 billon yuan in previous sessions, but it still withdrew 100 billion yuan on a net basis as 280 billion yuan was set to expire.

The PBOC said the injection was meant to keep banking system liquidity reasonably ample as fiscal expenditure…

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