China's central bank may restart 3-year bond offerings
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The People's Bank of China (PBoC), China's central bank, asked commercial banks to report on demand for three-year bonds Monday, prompting market speculation that it may resume selling three-year bills Thursday.
A three-year bond offering, which would come in the way of April CPI data scheduled to be released Wednesday, would help take excess liquidity out of market and alleviate mounting inflationary pressure.
The resumed offering would also allow the PBoC to diversify its open market operations and ease the pressure from a large amount of bills set to mature soon.
PBoC previously issued three-year bills on Nov. 25 last year, borrowing 1 billion yuan at a yield of 3 percent.
The bank has suspended such bond offerings since Dec. 9 as demand for the paper has been damped by reserve requirement ratio hikes.
"Compared with the three-month and one-year bill sales in the regular open market operations, a three-year bond sale can drain off liquidity longer, enabling the central bank to combat long-term inflation instead of lifting banks' reserve requirement ratio," said Li Huaiding, a bond analyst at Guoxin Securities.
But such an offering doesn't point to a reverse of monetary policy, he added.
Li also said whether the offering will mitigate capital requirement pressure imposed on commercial banks still depends on how much and how often the central bank issues the three-year bonds.
Fu Bingtao, a researcher at the Agricultural Bank of China (ABC), said PBoC will slow down the pace of reserve ratio requirement hikes in the near future because seasonable factors will cause bank deposits to rise in the second quarter.
According to the latest ABC report, the central bank will at least raise banks' reserve requirement ratio once over the next two months, probably in June.
