SHANGHAI/SINGAPORE, Sept 13 (Reuters) - China's central bank is set to ramp up bill sales again in Hong Kong next week, it said on Wednesday, a sign for many market participants that authorities are keen to steady a weakening yuan.
Selling bills in the Asian financial hub will soak yuan liquidity out of the market, making it more expensive to short the yuan, which has lost more than 5% year to date to become one of Asia's worst performing currencies.
Widening yield differentials with other major economies, particularly the United States, and a faltering domestic economic recovery have piled pressure on the yuan.
The People's Bank of China (PBOC) will sell 15 billion yuan ($2 billion) worth of six-month yuan-denominated bills in Hong Kong on Sept. 19, it said in a statement.
It marks the biggest auction for the six-month tenor since the PBOC started selling offshore yuan bills in 2018. The sale is far more than the 5 billion yuan of six-month bills set to expire next week.
"The PBOC is making such bill sales a regular tool in managing offshore yuan liquidity," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong, adding that the central bank has also increased auction sizes for other tenors.
The central bank sold 35 billion yuan worth of bills in Hong Kong in August, exceeding the 25 billion yuan of bills that matured last month. The offering included 20 billion yuan of three-month bills, double the amount of those maturing.
The PBOC has usually conducted a flat rollover by auctioning the same amount of bills as those maturing.
China's major state-owned banks were also seen mopping up yuan liquidity in the offshore foreign exchange market in recent weeks, sources told Reuters. This involves refraining from lending to their peers and trading in swaps to take the yuan out of the market. ($1 = 7.2901 Chinese yuan)
(Reporting by Winni Zhou and Tom Westbrook; Editing by Edwina Gibbs)
