NDIRS up as central bank hikes bill yields

SHANGHAI: China's central bank surprised the market yesterday by raising the auction yield of its three-month bills for the first time since mid-August, and the significant step-up in liquidity tightening sent offshore non-deliverable interest rate swaps (NDIRS) sharply higher.

The People's Bank of China (PBOC) is also set to drain a net 137 billion yuan from the market this week, the biggest weekly drain in 11 weeks, as it intensifies the pace of quantitative tightening to curb excessive market liquidity.

"Both the hike of the auction yield and heavy drain were unexpected as the market had thought that the central bank would at least be lenient ahead of the Spring Festival," said money market analyst Liu Junyu at China Merchants Bank in Shenzhen.