SHANGHAI: China’s central bank cut the yield for a key short-term money rate yesterday for the fourth time this year, as regulators step up efforts to reduce funding pressure on Chinese companies.
The reduction of the yield on the 14-day bond repurchase agreement (repo) to 3.4 per cent, from 3.6 per cent, follows a surprise cut to benchmark lending rates on Friday to support the cooling economy, and follows similar moves last month and July as growth wobbled.
Expectations for further easing have stimulated stock markets in China and abroad, while depressing domestic bond yields and putting downward pressure on the yuan.
“This signals the central bank will make further efforts to lower borrowing costs for investors and support liquidity,” a trader at a city bank, here, said.
The People’s Bank of China cut one-year benchmark lending rates by 40 basis points to 5.6 per cent late on Friday, and at the same time increased the maximum payable deposit rate to 3.3 per cent from 3.2 per cent.
Yesterday, it drained five billion yuan (RM2.73 billion) from money markets through 14-day repos. The size of the issue was negligible, but traders read the decision to cut the official yield as a further reminder to Chinese financial institutions to lower the cost of money.
The traded yield on the 14-day repo had already fallen sharply on Monday, and is now down over 60 basis points from Friday’s weighted average rate.
But it did not respond strongly to the announcement, with the average standing at 3.81 per cent at midday.
Other money rates continued to decline, with the benchmark seven-day repo weighted average at 3.3013 per cent at midday, down 20 basis points from 3.5052 on Monday, when the rate fell nearly 50 basis points as the market opened. Reuters