Liquidity Pressure Returns

China’s interbank market traders were caught out by a sudden tightening of liquidity conditions this week, with money market rates rising to their highest levels since March. A sharp decline in deposits last month and some seasonal tax payments may explain the crunch, with the PBOC slow to respond to the first signs of pressure. Markets are eyeing the possibility of new open market operations tools to improve liquidity, but the squeeze indicates credit and bank asset growth will continue slowing.

Posted August 17, 2017
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