The People’s Bank of China (PBOC) is sucking out liquidity from the financial system in a bid to rein in leverage.
The central bank drained a net 150 billion yuan ($23 billion) on Thursday – the largest amount since October – and has withdrawn a total of $23 billion from the system, according to Bloomberg.
As a result, the spread between China’s 10-year government bond yield and the overnight rate has now narrowed to 16 basis points versus 263 basis points in late December.
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