On April 7th, an 800 billion yuan outright reverse repurchase operation will be conducted, corresponding to a net withdrawal of 300 billion yuan.

The Daily News Reporter | Zhang Shoulin     The Daily News Editor | Liao Dan

On April 3, the PBOC announced that, to maintain ample liquidity in the banking system, on April 7, 2026, the People’s Bank of China will conduct RMB 800 billion in a buyout-style reverse repo operation via fixed-amount bidding with interest-rate bidding and a multiple-price bid winning method. The term will be 3 months (89 days), and the maturity date will be July 5, 2026 (with any extension for public holidays).

On April 8, RMB 1.1 trillion in 3-month buyout-style reverse repos will mature; at that time, the corresponding buyout-style reverse repo for that term will result in a net liquidity drain of RMB 300 billion.

The reporter noted that since entering April, open market operations have continued to be in a net liquidity drain position, indicating that liquidity in the money market is relatively abundant.

Wang Qing, Chief Macro Analyst at Oriental Jincheng, said that the continuous reduction in the volume of follow-on issuances of 3-month buyout-style reverse repos is consistent with the recent series of “very low volume” operations in the open market. The main reason is that, since the beginning of April, market liquidity has been relatively loose.

A team led by Mingming, Chief Economist at CITIC Securities, analyzed that, on the one hand, after cross-month funding ends, coupled with the conclusion of banks’ quarterly liquidity performance assessments, liabilities are relatively well-supplied; on the other hand, April is often a “credit small month,” while the full annual plan for the issuance of special treasury bonds has not yet been published, so the current “shortage of assets” pattern in the bond market continues.

Continuous two months of reduced-volume follow-on issuance of 3-month buyout-style reverse repos

On April 3, the PBOC announcement said that it will conduct RMB 800 billion in 3-month buyout-style reverse repo operations on April 7. Wang Qing pointed out that data show that in April, RMB 1.1 trillion in 3-month buyout-style reverse repos will mature. As a result, when the PBOC carries out RMB 800 billion in 3-month buyout-style reverse repo operations on April 7, it means that, for that month, the 3-month buyout-style reverse repos are followed on with reduced volume, with a reduced issuance size of RMB 300 billion. This is the PBOC’s continuous two-month reduced-volume follow-on issuance of 3-month buyout-style reverse repos; the reduced issuance size expands by RMB 100 billion compared with the previous month, which is in line with expectations.

April’s money injection and drainage

Wang Qing judged that the continuous reduced-volume follow-on issuance of 3-month buyout-style reverse repos, consistent with the recent continuous “very low volume” operations in the open market, is mainly due to factors such as the PBOC’s large-scale net injection of RMB 1.9 trillion in medium-term liquidity through the combined use of MLF and buyout-style reverse repos from January to February, as well as the relatively low net financing scale of government bonds in March. Thus, in adjusting mid- and short-term liquidity, the PBOC has appropriately “drained water,” releasing signals to guide liquidity conditions to remain stable and to avoid major market interest rates deviating downward excessively from the policy rate. This helps stabilize market expectations.

Mingming’s team analyzed that, entering April, liquidity conditions are quite loose. On the one hand, cross-month funding ends, and combined with the end of banks’ quarterly liquidity assessment period, liabilities are relatively well-supplied; on the other hand, April is often a “credit small month,” while the full annual issuance plan for special treasury bonds has not yet been released, so the current “shortage of assets” pattern in the bond market continues. It may also be because, with funding already relatively loose, there is not a strong need for the PBOC to further step up liquidity provision.

Need to monitor the issuance of 10-year government bonds in the second quarter

“We believe this does not mean the PBOC will continue to tighten medium- and long-term liquidity; once the main market interest rates rise back to around the policy rate, buyout-style reverse repos are expected to resume net injections.” Wang Qing said. Looking at the full year, the PBOC will comprehensively use medium- and long-term liquidity management tools such as the reserve requirement ratio, government bond purchases and sales, MLF, and buyout-style reverse repos to keep liquidity conditions at a relatively stable and ample level. This can ensure the issuance of government bonds, while also releasing signals that the quantitative monetary policy tool will continue to increase its efforts.

Wang Qing also reminded that it is worth noting that since late February, changes in the situation in the Middle East have pushed international oil prices sharply higher, and in March, the overall level of domestic prices showed a strong upward trend, which also creates some disruptions to economic growth momentum. In the short term, amid a sudden rise in external uncertainty, while keeping ample liquidity in the domestic market, China’s monetary policy will also, in stages, tilt toward stabilizing prices. The timing of reserve requirement cuts may be delayed; later, if external shocks further intensify disruptions to domestic economic growth, monetary policy will correspondingly increase the degree of appropriate easing.

However, the issuance of 10-year government bonds in the second quarter still needs attention. Mingming’s team analyzed that, because each month in the second quarter has only two issues of 10-year government bonds, and considering that after the subsequent issuance plan for special treasury bonds takes effect, the increased supply of ultra-long bonds may occur, whether the current environment of materially ample funding can continue is worth watching.

It should be mentioned that on March 31, the PBOC website disclosed the contents of the PBOC’s Monetary Policy Committee’s 2026 Q1 regular meeting. Compared with the previous quarter’s analysis of the domestic and foreign economic and financial situation, the latest meeting newly adds that it “still faces issues and challenges such as strong supply and weak demand, as well as external shocks,” whereas the corresponding wording in the previous quarter was “still faces issues and challenges such as prominent supply-demand contradictions with strong supply and weak demand.”

Mingming’s team believes that in the next stage, the PBOC may pay even more attention to the impact on domestic conditions from overseas geopolitical risks, trade conflicts, and other factors, and to hedging those impacts.

Cover image source: The Daily Economic News media resource database