By staff reporter Huo Kan

(Caijing.com.cn) Yields on 28-day repurchase agreements rose for the first time in 2009, while 91-day yields rose for the first time since early February, developments which could signal the central bank's concern about the pace of credit growth in June, analysts said.

On June 30, the People's Bank of China drained 50 billion yuan from the money market via 28-day repos yielding 0.95 percent. The yield had been maintained at 0.90 percent since Dec 23, 2008.   

On the same day, the central bank sold 30 billion yuan worth of 91-day repos, resuming operations which were suspended after the last sale on April 21. The yield rose to 1.00 percent from 0.96 percent, the first rise since February 5.

China's central bank drains money from the system via its regular operations on Tuesdays, when it issues repos, and Thursdays, when it issues bills.

China International Capital Corp chief economist Ha Jimin told Caijing that rising repo rates means the central bank could be concerned about lending in June growing faster than expected. New loans may have topped one trillion yuan, he added, while new loans in the first half may have exceeded seven trillion yuan.

Ha said that by resuming its 91-day repo operations, the central bank is signaling that it intends to lock up more liquidity for longer periods.

After draining funds in the preceding two weeks, the central bank reduced its open market operations last week and supplied a net 115 billion yuan into the system as big banks hoarded cash ahead of the resumption of initial public offerings.

On June 18, Guilin Sanjin Pharmaceutical Co. received final approval to list on the domestic stock market at the end of June. It was the first company approved for an A-share initial public offering in over nine months.

CICC's Ha added that this week's repo rate hike does not signal a change in the central bank's monetary policy, but is rather a sign the central bank wishes to control the pace of credit growth.

The State Council, China's cabinet, said at a recent meeting the government needs to "firmly continue with positive fiscal policies and appropriately accommodative monetary policies."

Bank of Communications chief economist Lian Ping told Caijing that in the near term, it is unlikely the central bank will adjust interest rates or bank reserve requirements. It will, instead, fine tune through open market operations, he said.

1 yuan= 14 US cents

Full article in Chinese: http://www.caijing.com.cn/2009-06-30/110191430.html