PBOC will inject funds if IPOs push money rates higher: ANZ

[SHANGHAI] The People's Bank of China will pump funds into the financial system if a resumption of initial public offerings pushes money rates higher, according to Australia & New Zealand Banking Group Ltd.

Twenty-eight companies were in the process of going public when a freeze on IPOs was imposed in July and sales will restart this year, according to China Securities Regulatory Commission, which from 2016 will no longer require investors to deposit funds when applying for subscriptions. The first 10 IPOs will lock up as much as 1.3 trillion yuan (S$290 billion), David Qu, an interest-rate strategist at ANZ in Shanghai, wrote in a research note on Monday, citing a market estimate.

"However, we expect the PBOC to inject liquidity via open-market operations to stabilize the market when necessary," he said.

The seven-day repurchase rate, a gauge of interbank funding availability, climbed 24 basis points in the three days through June 4, the most since February, when subscriptions for 23 IPOs were estimated to have frozen 4.9 trillion yuan. The repo rate rose three basis points on Tuesday to 2.31 per cent as of 4:30 p.m. in Shanghai, a weighted average from the National Interbank Funding Center shows.

The central bank injected 10 billion yuan via seven-day reverse repos on Tuesday, offering an interest rate of 2.25 per cent. The PBOC has been providing the same amount of money in open-market operations for the past three weeks.

The yield on 10-year government bonds was little changed at 3.16 per cent, data from the National Interbank Funding Center show. China's local-currency bonds, which rallied in the five months through October, are expected to be range bound this month, ANZ's Qu said.

BLOOMBERG