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The Wall Street Journal: China’s central bank moves to deflate bond speculation

SHANGHAI — China’s central bank has made a subtle change to the way it supplies the financial system with cash, a move that market watchers see as an attempt to cool investments in assets such as bonds, which have ballooned on an influx of cheap, short-term money.

For the past two weeks, the People’s Bank of China has been decreasing the amount of the cheap seven-day loans — known as reverse repurchase agreements, or repos — that it makes to commercial banks in its daily money-market operations.

On Wednesday, it started supplementing those seven-day repos with pricier 14-day repos, a move that decreases the amount of cheap, short-term credit available in the financial system and guides demand toward longer-term borrowing.

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