The central bank will conduct 800 billion yuan worth of outright reverse repos on the first day after the holiday. What signals does this send?

Reporter Xin Yuan

On April 3rd, the People’s Bank of China announced an open market reverse repurchase operation tender notice, stating that to maintain ample liquidity in the banking system, on April 7, 2026, it will conduct 800 billion yuan of fixed-amount, interest rate tender, multi-price bid reverse repurchase operations, with a 3-month (89 days) maturity, expiring on July 5, 2026 (postponed if it falls on a holiday).

Data shows that in April, 1.1 trillion yuan of 3-month reverse repos mature. Therefore, the central bank’s operation on April 7 of 800 billion yuan of reverse repos indicates a continuation of the 3-month reverse repurchase with a reduced scale, shrinking by 300 billion yuan. This marks the second consecutive month that the central bank has reduced the scale of 3-month reverse repos, with the reduction expanding by 100 billion yuan compared to the previous month.

Wang Qing, Chief Macro Analyst at Orient Securities, told Jiemian News that the continued reduction in the 3-month reverse repurchase operations aligns with recent persistent “low-volume” operations in the open market, mainly due to relatively loose market liquidity since early April.

Recently, the average of DR001 has remained below 1.3%, and on April 2, the yield on 1-year AAA-rated commercial bank interbank certificates of deposit fell below 1.5%, hitting a record low, both indicating relatively low levels.

“This is mainly driven by the central bank’s large-scale net liquidity injections of 1.9 trillion yuan through MLF and reverse repos in January and February, as well as the relatively low net financing scale of government bonds in March. As a result, the central bank has moderately ‘withdrawn water’ in short- and medium-term liquidity management, signaling to guide stable funding conditions and prevent major market interest rates from deviating excessively downward from policy rates, which helps stabilize market expectations,” Wang Qing said.

However, Wang Qing pointed out that this does not mean the central bank will continue to tighten medium- and long-term liquidity. Once major market interest rates rise back near the policy rate, reverse repos are expected to resume net injections.

Looking at the whole year, Wang Qing analyzed that the central bank will comprehensively use tools such as reserve requirement ratio adjustments, government bond buying and selling, MLF, and reverse repos to maintain relatively stable and ample liquidity. This approach can ensure government bond issuance while signaling continued efforts to enhance quantity-based monetary policy tools.

The People’s Bank of China Monetary Policy Committee’s first-quarter 2026 meeting mentioned that, in the next phase, the main idea of monetary policy should be to leverage the combined effects of incremental and stock policies, use multiple tools comprehensively, strengthen monetary policy regulation, and, based on domestic and international economic and financial conditions and financial market operation, carefully manage the intensity, pace, and timing of policy implementation.

In an interview, Wang Qing pointed out that since the end of February, evolving Middle East tensions have driven international oil prices sharply higher, and in March, the overall domestic price level showed a strong upward trend, which could also disturb economic growth momentum. In the short term, amid rising external uncertainties, domestic monetary policy will maintain ample market liquidity while also periodically leaning towards price stabilization, possibly delaying the timing of RRR cuts; if external shocks further disrupt domestic economic growth, monetary policy will respond with increased moderate easing.