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China's central bank issued a record 90 billion yuan (US$11 billion) in bills and siphoned off another 5 billion yuan via repurchase agreements Tuesday, as the government stepped up efforts to siphon off funds resulting from forex intervention.
The 90 billion yuan was more than double last week's 40 billion yuan mopped up from the banking system, though half of that would not be settled until late February.
On Tuesday, the People's Bank of China (PBOC) sold 30 billion yuan in one-year bills that require payment Feb. 28, an instrument launched in December that delayed normal settlement by a month, as opposed to the next working day.
It soaked up 36 billion yuan via regular one-year bills, 24 billion yuan in six-month bills, and 5 billion yuan by entering into seven-day repurchase agreements as well, the bank said in a statement on the official Web site for bond issues.
The newly introduced bills were introduced to drain surplus funds after the Lunar New Year holidays, which traditionally sparked a consumer spending spree.
China's Spring Festival, or Lunar New Year holidays, begins Feb. 9 and China's financial markets will be closed from then and reopen Feb. 16.
The coupon for the new-fangled one-year bills climbed to 3.4019 percent from 3.2418 percent last week, while those for regular bills inched up to 3.2844 percent versus 3.2738 percent last Tuesday.
Yields on six-month bills stood at 2.884 percent while those on seven-day repurchase agreements slipped to 1.6476 percent from 1.6882 percent Jan. 4.
"In order to maintain a stable yuan, the central bank had taken in a large amount of foreign cur-rencies flowing in from abroad in 2004," said a Shenzhen-based securities analyst.
Keeping a lid on funds in the system has been a crucial aspect of the government's steps to gently slow its economy.
It issues bills and bonds and enters into repurchase agreements every Tuesday and Thursday.
(Shenzhen Daily January 12, 2005)
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