Business Hour

China gains $17 billion into system amid Evergrande concerns

China’s central bank net-injected the vastly short-term liquidity in 8 months into the financial system, with markets roiled by concerns over China Evergrande Group’s debt crisis.

With seven and fourteen-day reverse repurchase agreements, The People’s Bank of China pumped in 110 billion yuan ($17 billion) of cash. The biggest addition via open-market operations since late January during funding compression, sent interbank soaring rates. Stoking bets that Beijing hopes to soothe market nerves over Evergrande. Prior to Thursday, the PBOC had injected liquidity for three straight sessions.

The coupon on the security, which has a 30-day grace period before a missed payment would constitute a default, is part of $669 million of bond interest due through the end of this year. The focus is on the ability of the developer to pay $83.5 million of interest due Thursday on a five-year dollar note or not.

“The entire real estate sector, and consequently, financials, are in question, and vague statements to avoid defaults won’t cut it for long,” said Craig Botham, chief China economist at Pantheon Macroeconomics Ltd. “The PBOC’s reserve-requirement ratio cut is now more necessary than ever.”

Short-term interbank rates fell due to the PBOC’s cash injections. The overnight repo rate slid 14 basis points to 2.01 per cent, lowest level since September 3. For a third straight day, the seven-day rate dropped. The yield on 10-year government bonds fell one basis point to 2.85 per cent. On Thursday, the indebted developer’s Hong Kong-listed shares rose 18 per cent.

They were up as much as 32 per cent in morning trading, as investors bet the company would avoid a disorderly debt resolution after one of its units negotiated interest payments on yuan bonds.

Lenders also need to hoard more funds ahead of the one-week holiday at the start of October. Apart from attempting to ease market concerns over Evergrande, authorities also tend to loosen their grip on liquidity towards quarter-end due to increased demand for cash from banks for regulatory checks.

Also Read:-RIL developing Rs 75K cr green energy complex’: Mukesh Ambani

Share

Recent Posts

Bengaluru’s Worsening Water Crisis Should be the Wake-Up Call for India and The World

Bengaluru is facing an acute shortage of 500 million litres of water every day, which…

3 days ago

The Aam Admi Party Conundrum: Will Kejriwal Run The Delhi Government From Prison?

Delhi's Chief Minister, Arvind Kejriwal, has been arrested by the Enforcement Directorate (ED) and will…

3 days ago

Planning to vote for Modi This Year? Wait! Give it a Read to Become an Informed Voter First

The Indian growth story has been famously dubbed the 'Amrit Kaal' by leaders and ministers…

1 week ago

Key Takeaways From Kovind Panel’s Report on One Nation One Election

The report highlights a two-step process in conducting nationwide simultaneous elections that needs many constitutional…

2 weeks ago

TEPA: How a $100 Billion Free Trade Agreement with EFTA will Benefit India?

India and the four European Free Trade Association (EFTA) countries—Iceland, Norway, Liechtenstein, and Switzerland—have finally…

2 weeks ago

All about India’s Fifth Generation Indigenous Fighter Jet AMCA

A 15,000 crore project has been cleared by the Cabinet Committee on Security(CCS) to design…

3 weeks ago