Funding conditions marginally converge, interbank liquidity returns to equilibrium
Since the beginning of June, there has been a noticeable convergence in the interbank money market, with interest rates returning to and temporarily exceeding policy rates. This shift is attributed to a reduction in long-term liquidity injections and a decrease in lending from major banks. Analysts suggest this is a recalibration of rates from an excessively low level rather than a tightening of monetary policy. Factors contributing to increased short-term rate volatility include reduced lending by large banks, precautionary liquidity management by wealth management products, and quarter-end effects. AI