FXStreet (Mumbai) - The People’s Bank of China today injected 130 billion yuan ($19.9 billion) into financial system with the objective to soothe nerves of jittery investors. The funds were offered in the form of reverse repos at 2.25 per cent interest rate. With this the PBoC conducted the biggest reverse-repurchase operations since September.. Investor sentiment suffered yesterday after the Chinese central bank decided against renewing credit line to China Development Bank. The PBoC acted on the belief that liquidity in the market was sufficient. This decision of the PBoC caused the investors to believe that the central bank was opting to tighten monetary policy to execute reforms. Today’s decision taken by the PBoC can be read as the central bank’s effort to assure investors that it has not gone back on its easing commitment. The monetary authority had on December 31st suspended the operations at the last auction. This had put an end injection of cash carried out in the last six months which helped lowered borrowing costs. Post the suspension, overnight repurchase rate increased to 2.12 per cent, the highest level since April. The PBoC’s today’s decision to inject 130 billion yuan into the system has once again lowered the rate. The National Interbank Funding Center noted the overnight repurchase rate fell one basis point to 2.01 per cent as of 1:41 p.m. in Shanghai. Frances Cheung, Hong Kong-based head of rates strategy for Asia ex-Japan at Societe Generale SA, feels “Liquidity is tight in the market and the PBOC has to react to that”. He also thinks that more easing in the near term is likely given the tightening of liquidity on capital outflows Rebound in stocks today was short lived The monetary authority will likely cut the reserve-requirement ratio for major lenders to further lower it to 15 per cent by the end of this year, according to a survey last month. However, speculation of a further cut in reserve ration suffered a setback when a central bank research bureau economist warned that adjustments should not cause too much volatility to short-term rates. On the very first trading day of 2016, a 7 per cent selloff in the CSI 300 Index caused stock trading to be suspended in China for the first time. Liu Dongliang, a senior analyst at China Merchants Bank Co. thus feels today’s PBoC’s move was necessary to comfort the market. After yesterday’s 7 per cent plunge, Chinese stocks today swayed constantly from positive to negative territory. It fell 2 per cent in early trade and finally closed down 0.3 per cent. According to National Interbank Funding Center, sovereign bonds declined today. The 10-year yield however increased two basis points to 2.91 per cent. The early rebound witnessed by Chinese stocks caused by the central bank’s generous injection of funds, fizzled out quickly as investors continues to suspect Beijing’s easing intentions. For more information, read our latest forex news.