Another day of tightening interbank market liquidity conditions has apparently triggered a PBOC response, with a media report and traders claiming the central bank injected hundreds of billions of yuan to calm the market today, following several reported interbank payment defaults on Monday. The problem facing the central bank in assuaging money market tension is that managing liquidity in a shadow bank-dominated financial system is far more difficult than in a bank-centric system, and the squeeze is likely to continue through early April.
