PBOC Refrains From Adding More Liquidity as Cash Needs Grow

(Bloomberg) — The People’s Bank of China (PBOC) refrained from adding more liquidity into the banking system for a fourth month, as policymakers sought to contain rising leverage.

The central bank injected 150 billion yuan ($23 billion) into the financial system with its medium-term lending facility. That’s slightly less than the 100 billion yuan due on Thursday and 56.1 billion yuan of targeted loans maturing on April 25.

Beijing is providing just about enough cash at a time when banks are expected to help corporate clients pay taxes and sales of government bonds are forecast to accelerate. Policymakers have said they want to stabilize a rapid buildup in leverage, as the nation’s debt as a percentage of GDP jumped to a record high.

The operation “is a bit disappointing to the bond market and funding costs will rise,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group Ltd. in Shanghai. He expects the PBOC to add cash through seven-day reverse repurchase agreements to plug the liquidity gap as tax payment season starts later this month.

Contact editor Michael Bellart (michaelbellart@caixin.com)

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