China’s central bank has got off to a hawkish start on banking system liquidity this month, sending a clear signal that the days of monetary easing are over, according to the South China Morning Post. After skipping open market operations on Tuesday, the People’s Bank of China released 140 billion yuan (US$20.3 billion) in additional liquidity in the interbank market on Wednesday but did not renew the 230 billion yuan medium-term lending facility that matured the same day. That move is expected to further squeeze money for banks and push up short-term rates. “The good economic performance in the first quarter has given room for financial deleveraging, a key theme for this year,” China Minsheng Banking chief analyst Wen Bin said. Market worries of tighter liquidity drove up the overnight Shanghai interbank offered rate to 2.8451% yesterday, the highest reading in two years.
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