China central bank to conduct daily overnight reverse repos from Monday
China's central bank will conduct overnight reverse repo operations every working day from next Monday to improve short-end rate controls, using fixed rates and quantity-based bidding. Seven-day repos will be conducted during tax periods and month-ends.
The People's Bank of China (PBOC) announced on 30 October that from next Monday, it will conduct overnight reverse repo operations every working day to optimise short-end interest rate control mechanisms. The operations will use fixed interest rates and quantity-based bidding, although the central bank did not specify a daily maximum operation scale. The PBOC stated that the current overnight reverse repo operation interest rate is 1.25 per cent.
The PBOC said seven-day reverse repo operations will be adjusted to fixed-quantity, interest-rate bidding with multiple winning prices, and will mainly be conducted during tax periods and at the end of the month.
Other instruments that were previously based on adding or subtracting basis points from the seven-day reverse repo operation rate—including temporary repos and reverse repos, and repo tools for overseas central bank-type institutions—will now be adjusted to add or subtract basis points from the overnight reverse repo operation rate, with the same margin of adjustment unchanged.
At the end of this month, the PBOC conducted 1 trillion yuan of overnight reverse repo operations for four consecutive days, while also conducting seven-day operations. The net injection for this week reached 1.411 trillion yuan, the highest since mid-July.