THE central bank lent 463 billion yuan (US$72.43 billion) to financial institutions yesterday via its one-year medium-term lending facility (MLF), with interest rates unchanged.

The fund injection via MLF effectively rolled over 259.5 billion yuan worth of such loans maturing on the same day, as markets had expected.

It also added a net 203.5 billion of liquidity, the central bank said.

The move comes as more Chinese companies are concerned about tightening credit conditions, which are pushing up borrowing costs and leading to a gradual increase in corporate bond defaults.

Analysts believe the People’s Bank of China may be adjusting the way it conducts its various liquidity operations as financing conditions change, with yesterday’s move possibly pushing back the timing of another expected cut in banks’ reserve requirement ratios (RRRs).

Markets have generally expected another RRR cut in the second half after a surprise reduction in April, with some speculation that it could come as early as June or July.

“Today’s MLF operation reinforces our view for a delay in the next possible reserve requirement ratio cut,” said Frances Cheung, head of Asia macro strategy at Westpac First.

Cheung noted 238.5 billion yuan of MLFs due in June was repaid with money from the RRR cut in April.

“Following this pattern, the RRR cut might have covered MLF up to August. Second, the central bank more than rolled over the remaining 259.5 billion yuan maturing in June, suggesting the near-term strategy may be to cover liquidity needs via MLF.”

The MLF rollover was the first since the central bank expanded the guarantee scope of the bond instrument Friday.(SD-Agencies)