China's central bank on Tuesday did something it hasn't done in five months: it actively injected cash into local money markets, easing concerns of a repeat of the credit squeeze last month that sparked panic in global markets.
The People's Bank of China (PBOC) pumped in 17 billion yuan ($2.7 billion) into the money markets via seven-day reverse bond repurchase agreements. It was the first time the central bank has participated in open money-market operations since June 20 and the first time it has injected funds since early February.
"I see the levels [of the repo operation] more as a shift in the PBOC's stance to actively managing money market conditions to avoid a re-run of the liquidity squeeze in June," Societe Generale economist Wee-Khoon Chong said in a note.
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"[It] could also serve as a signal that the era of ultra-loose and easy money is over and liquidity has to be appropriately priced (with some leeway of course)," he added.
Analysts said the central bank was motivated to act after the benchmark seven-day repurchase rate spiked to 5 percent on Tuesday for a second straight session following a jump to 4 percent on Friday. It was just below 5 percent on Tuesday, edging down after the injection of funds by the PBOC.