China’s central bank reduces short-term liquidity for the first time in 8 days

On Monday, November 21, The People's Bank of China (PBC) reduced short-term liquidity from the banking system for the first time over the last eight days, as bond markets managed to rebound after the recent sell-off.

PBC also put 3 billion yuan, which is almost $419 million, into the banking system by a 7-day reverse repurchase agreement in the open market on Monday. 

Last week, China’s central bank put 368 billion yuan into the system through this agreement because the bond market faced an unprecedented sell-off recorded for the first time in two years. There is also an increased tendency of taking risks against the background of rising expectations for an easing of the country’s current COVID-19 restrictions.

Many traders noted that market sentiment has improved: bond prices started to rise, while its yields, on the contrary, declined. At the same time, futures contracts for the benchmark 10-year government bond showed growth by more than 0.3%.