China's interbank money rates slip after cash injection

BEIJING - China's interbank money rates eased Tuesday, ending a rising streak of more than a week following a massive cash injection by the central bank via open-market operations.

The benchmark overnight Shanghai Interbank Offered Rate (Shibor), which measures the cost at which Chinese banks lend to one another, dropped by 0.9 basis points Tuesday to 2.036 percent, still a two-month high.

The Shibor for one-week loans also declined, but the rate for one-month loans continued to edge up.

The drops came after the People's Bank of China (PBOC) on Tuesday added 140 billion yuan ($21.5 billion) into the banking system through seven-day reverse repurchase agreements (repo), a process in which central banks purchase securities from banks with an agreement to resell them at future dates.

The injection followed Monday's 180-billion-yuan seven-day reverse repo operation. The PBOC also pumped 267 billion yuan into the market on Monday via medium-term lending facilities (MLF).

The central bank conducted similar operations last week, resulting in a net 680 billion yuan pumped into the market, which was offset by maturing reverse repos that drain liquidity. It was the largest weekly injection in three months.

The PBOC has been injecting funds into the financial system using MLF and reverse repo agreements to ease worries about a short-term liquidity squeeze.

Citic Securities analysts said the central bank may continue the MLF and reverse repo operations to ease the cash strain, while a reduction in banks' reserve requirement ratio will be unlikely in the short term.