PBOC Cuts Daily Cash Operations to Record Low to Curb Bond Rally
China's central bank reduced its daily open market operations to an all-time low, stepping up efforts to drain excess liquidity and rein in a surge in government bond prices and falling yields.
The People's Bank of China (PBOC) has scaled back its daily open market operations to a record minimum, according to Bloomberg. The move is part of a broader campaign to absorb excess liquidity from the financial system, with the aim of curbing the rapid rally in Chinese government bonds and the corresponding drop in yields.
The PBOC's actions reflect growing concern over the pace of the bond market rally, which has been driven by expectations of further monetary easing. By reducing cash injections, the central bank signals a desire to prevent overheating in the fixed-income market while still maintaining overall stability in interbank funding conditions.
Market observers view the operation as a calibrated tightening measure, though the PBOC has not altered its benchmark policy rates. The record-low daily operation underscores the central bank's preference for fine-tuning liquidity rather than deploying more aggressive tools.
Source: MarketTwits