China's central bank withdrew cash from the banking system, signaling that it views Tuesday's sudden increase in short-term borrowing costs as a temporary disruption.
The People's Bank of China sucked a net 109 billion yuan ($14.9 billion) from the money market on Wednesday by offering seven-day reverse repurchase agreements.
The move to cash out came despite financing conditions tightening sharply in recent days due to end-of-month demand, caused by tax payments and large government bond sales, with one trader reporting a rise of up to 50% in the overnight interest rate in isolated trades on Tuesday. . The weighted average overnight repo rate rose 18 basis points to 1.86% Tuesday, the biggest gain since September 28, according to data compiled by Bloomberg.
