SHANGHAI: China's central bank has not asked banks about their demand for bills in an auction due on Thursday, meaning it may skip the sale for the second week in a row, traders said on Wednesday.
Dealers said the central bank's move was a signal that it intended to ease liquidity in the market, with strong demand for cash in the lead-up to the Lunar New Year holiday later this month.
"Money demand in January is always large, so the central bank may want to help ease the money," said a dealer in a state-owned bank in Beijing.
The People's Bank of China (PBOC) also skipped the sale of bills last Thursday, helping to ensure that it conducted a net injection of 9 billion yuan ($1.4 billion) into the financial system last week.
With 51 billion yuan in bills and repos set to mature this week and China's markets having been closed for a holiday on Monday and Tuesday, the PBOC looks set to inject a sizeable amount of funds this week.
The PBOC consults with banks the day before its regular bill auctions and repo operations to gauge demand before deciding on sale volumes.
Last year, the central bank injected a net 1.91 trillion yuan through its open market operations, which was largely offset by drains through increases in banks' required reserves.
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