China’s central bank injected hundreds of billions of yuan into the financial system after some smaller lenders failed to make debt payments in the interbank market, according to people familiar with the matter. Tuesday’s injections followed missed interbank payments on Monday, the people said, asking not to be identified because the matter isn’t public. The institutions that missed payments included rural commercial banks, according to three traders. One said a borrower failed to repay an overnight repo of less than 50 million yuan ($7.3 million), according to Bloomberg. China’s smaller lenders faced tighter liquidity this week as benchmark money market rates climbed to the highest level since April 2015, reflecting a mix of technical factors including cash hoarding for quarter-end regulatory checks. By letting borrowing costs rise, the People’s Bank of China may have been sending a warning to over-leveraged lenders.
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