China's interbank rate slips after cash injection

China's interbank money rate fell on Tuesday after the central bank put funds into the system by selling seven-day reverse repurchase (repo) contracts for the first time in two weeks.

The People's Bank of China (PBOC), the central bank, injected 21 billion yuan (3.43 billion U.S. dollars) through repo agreements, a process in which central banks purchase securities from banks with an agreement to resell them at future dates.

The PBOC's last reverse repo was on Dec. 3, but the suspended manipulating liquidity through reverse repos. Analysts fear pressure on liquidity toward the end of the year.

Tuesday's seven-day reverse repo was priced to yield 4.1 percent, according to a PBOC statement.

In Tuesday's interbank market, the seven-day Shanghai Interbank Offered Rate (Shibor), which measures the cost at which Chinese banks lend to one another, fell by 264.6 basis points to 6.197 percent from over 8 percent.

The rate hit a record high of over 13 percent in late June when a cash crunch hit, disturbing financial markets. Endit