My very smart young assistant Shang Ning (a PKU junior) buy tadalafil online, sent me the following note early this morning:
“Right after the market closed yesterday, PBoC announced a new issue of Central Bank Notes on Aug 9th (today).The total sum is 57 Billion RMB ($7.5B); buy tadalafil online.It is a much larger sum than in July buy tadalafil online, and since entering into August, the sum significantly increased.This is taken as a kind of worry on over-liquidity and overheating of economy since CPI of first half has been reported. The 57B central bank notes will be divided into two groups: 22 B with maturity of 3 years and 35B with a maturity of 9 months.The maturity is also larger than central bank notes inssued in July. Expectation of maturing notes in this week is 58 B, and in the end of July, it was 32B.”
The market, which had been rising all yesterday morning, suddenly went into a swoon late in the day and there was no real news to explain it. It annoys me no end that after the market closed this news, about what seems to be a larger-than-expected tightening, came out, but of course it doesn’t surprise me.
I haven’t been able to find confirmation in today’s foreign press, but if true I think it makes sense to extend maturies in this way (although the total issue size doesn’t seem that big compared to maturing bills). I have always been very skeptical about the usefulness of a sterilization process that exchanges money for an almost-perfect substitute — very short-term and extremely liquid central bank bills — and so I would prefer that the PBoC extend maturities and reduce the liquidity of these bills as much as possible.
This will allow them to do a better job of soaking up some of the tremendous liqudity flooding the system. It does probably increase the cost of sterilization, and with dollar assets declining relative to the PBoC’s yuan obligations, cost is probably an important issue, but if it does a better job of reducing liqudity in the system, so be it.
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