June 21 Friday 11:10 GMT
LONDON - Chinese Interbank rates fell on Friday morning with widespread talks that the People's Bank of China had instructed large banks and lenders to make lending liquidity available. However, the overnight repo rate has been quoted as high as 25 percent in the morning session, suggesting that the liquidity conditions have not eased enough to give the assurance to the interbank lenders.
The seven-day repo rate stood at 8.2%, below the 12% level yesterday but it was above the 4% rate during normal liquidity conditions.
The PBOC however, said that the central bank did not inject funds into the market via reverse repos and the reports of an intervention are "inaccurate".
The implications of a prolonged liquidity constriction could risk trigerring further even a broader credit crunch situation that can add to the Chinese economy already slowing down.