China's central bank signaled in its open market operations today that it is continuing some money "tightening".
The People's Bank of China auctioned 24 billion yuan ($3.5 billion) of one-year bills at a yield of 1.9264 percent, traders said, above market forecasts of 1.84 to 1.89 percent and up 8 basis points from last week's level.
In the previous one-year bill sale, the yield came in at 1.8434 percent, when the bank allowed a bigger-than-expected rise of 8 bps, after keeping the yield flat since mid-August.
It should be noted that these "tightening" steps are not halting PBOC money printing, just slowing them. The auction yield at 1.9624 remains below the secondary market trading at 2.0360, thus indicating that the PBOC is adding funds to keep the auction rates lower than the market rate. By raising the yield, however, the PBOC has turned the monetary spigot tighter, but has not shut it off.
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