China's Central Bank Injects Liquidity to Ease Bond Market Crunch
China's central bank, the People's Bank of China (PBOC), has infused CNY 84 billion ($11.6 billion) into the financial system through open market operations. This marks the largest single-day liquidity injection in February and reverses the central bank's recent liquidity tightening measures.
The move aims to address a cash crunch that has impacted the bond market, with the 10-year benchmark yield reaching its highest level since December. The PBOC's previous stance of tolerating higher repo rates and maintaining tight liquidity was aimed at supporting the yuan amid economic headwinds.
However, this stance had placed pressure on the bond market, prompting investors to shift funds into equities amid a tech-driven rally. The PBOC's liquidity injection has eased pressure, with the one-year government bond yield declining slightly to 1.47%.
The central bank's actions signal a potential shift in policy as the Chinese economy faces growing needs for looser monetary policy. Earlier this month, the PBOC hinted at a flexible approach in its monetary policy report, indicating a willingness to adjust policies based on domestic and foreign economic conditions.
Traders remain attentive to the central bank's stance, with further monetary easing likely needed to support economic growth.