BEIJING - China's central bank injected 900 billion yuan ($124.3 billion) into the banking system on Monday through one-year policy loans as local governments ramp up bond sales to mitigate debt burdens.
The People's Bank of China (PBOC) issued medium-term facility (MLF) loans to financial institutions at an interest rate of 2%. This operation is typically conducted by the PBOC at the end of each month.
As year-end approaches, China's banking system is experiencing heightened liquidity pressure, driven by a significant increase in local government bond issuances. November's bond issuance is projected to surpass 1.3 trillion yuan ($179.4 billion), marking the highest monthly volume in a year.
Citic Securities noted that liquidity could be strained this week due to maturing reverse repos and rising bond issuance, coupled with month-end cash demand fluctuations.
Additionally, the PBOC is expected to lower banks' reserve requirements as a measure to alleviate liquidity constraints, according to a report from the official China Securities Journal.