China Overnight Funding Rate Soars Ahead of Reserve Requirement Cut

(Bloomberg) — Signs of a cash squeeze are appearing in China as the quarter-end approaches, underscoring how the nation’s economic rebound is driving demand for loans and prompting the central bank to ease policy.

The overnight repurchase rate, an indicator of interbank funding costs, climbed to the highest level since February 2021 on Tuesday. Short-term liquidity is becoming more scarce in the interbank market, as lenders set cash aside for quarter-end regulatory checks and disburse more loans amid a recovery fueled by a reopening of the economy.