The People's Bank of China’s reverse repo operation decreases again to 500 million

The People’s Bank of China (PBOC) announced that today it carried out a reverse repo operation with a fixed rate and quantity bidding for 500 million yuan (RMB; same below) with a 7-day term. The interest rate was maintained at 1.4 per mille, and the bidding volume continued to be the same as the winning volume. The open market has net withdrawn funds for four consecutive days; today the scale was 301.5 billion yuan.

Today, the PBOC will also conduct an 800 billion yuan outright reverse repo operation with a three-month term. Compared with the 1.1 trillion yuan maturing within the week, this represents a reduction of 300 billion yuan.

According to a Reuters tally, this week there are 304 billion yuan of reverse repo maturities in the open market, including 302 billion yuan maturing today. In addition, in April there are two batches of outright reverse repo maturities totaling 1.7 trillion yuan, with the April 8 maturity of 1.1 trillion yuan and a 3-month term; and the April 15 maturity of 600 billion yuan and a 6-month term.

The PBOC conducted reverse repo operations of 500 million yuan last Wednesday and last Thursday. The scale hit a new low since the shift to regular operations in early 2015. Although it rose slightly to 1 billion yuan on Friday, it was still at an extremely low level; for the whole week, total net withdrawal amounted to 170.2 billion yuan.

However, the central bank has repeatedly stated that it will fully meet the needs of primary dealers, and the funding market is very liquid. The overnight repo weighted average interest rate hit a new low since August 2023 on Friday. The secondary-market traded yield for 1-year interbank certificates of deposit at major state-owned and joint-stock banks set a record low. Market expectations for monetary policy easing remain unchanged.