Regulator plays down hot money fears
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The People's Bank of China (PBOC) yesterday guided its benchmark one-year bill yield higher for the second time this year.
The central bank sold one-year bills at a yield of 1.9264 percent in open-market operations. The yield rose eight basis points, or 0.08 percentage points, matching last week's increase.
"The eight basis point hike is within expectations, and the PBOC will continue to use the management tools to mop up liquidity," said Ma Yusheng, a bond analyst with Guoyuan Securities.
Ma said the yield would continue to rise to around 2.5-2.7 percent after which the PBOC may raise the benchmark interest rate to drain liquidity.
"The yield hike's main purpose is to raise the cost of financing for banks in the interbank market and thereby control new loan growth, and prevent bubbles in the property and stock markets," said Li.
China's commercial banks extended 379.8 billion yuan of new loans last month, capping a record 9.59 trillion yuan credit expansion for the year.
Property prices in 70 Chinese cities rose at the fastest pace in 18 months, according to official data.
The central bank announced an increase in the banks' reserve requirement ratio (the amount of funds banks must set aside as reserves) on Jan 12.
