(Bloomberg) -- China's central bank withdrew cash from the financial system, suggesting it sees Tuesday's abrupt surge in short-term borrowing costs as a temporary disruption.
The People's Bank of China drained 109 billion yuan ($14.9 billion) on a net basis from the money market Wednesday via offering seven-day reverse repurchase agreements, a short-term loan.
The cash withdrawal came even as funding conditions tightened sharply in recent days due to month-end demand induced by tax payments and large government bond sales, with a trader reporting a surge to as high as 50% by the overnight rate in isolated transactions Tuesday.
The weighted average overnight repo rate rose 18 basis points to 1.86% Tuesday, the biggest gain since Sept. 28, according to Bloomberg-compiled data.
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