PBOC to Conduct 1.4 Trillion Yuan Outright Reverse Repo Operation on July 15

The People's Bank of China (PBOC) announced on July 14 that, in order to maintain ample liquidity in the banking system, it will conduct a 1.4 trillion yuan outright reverse repo operation on July 15, 2026, using a fixed-quantity, rate-bidding, multi-price method with a tenor of 6 months (184 days), maturing on January 15, 2027 (postponed in case of holidays).

Data shows that 900 billion yuan of 6-month outright reverse repos will mature on July 15. Following the PBOC operation, this will result in a net injection of 500 billion yuan. This also marks the first time since March this year that the PBOC has made a net injection of 6-month outright reverse repos.

"The tax period in July arrives relatively early, and funds have generally shown a marginal tightening trend since mid-month. Looking at the PBOC's operations, open market operations have shifted to net injections over the past two days, while the 6-month outright reverse repo has shifted from rolling over the same amount last month to a substantial net injection of 500 billion yuan," said Ming Ming, Chief Economist at CITIC Securities. He noted that this can, on one hand, hedge against recent liquidity fluctuations, and on the other hand, help stabilize market confidence.

Dong Ximiao, Chief Economist at Zhaolian, stated that the increased rollover of 6-month outright reverse repos aims to address mid-year and cross-quarter funding fluctuations and ensure reasonably ample liquidity in the banking system. The 1.4 trillion yuan operation size not only covers the maturing amount but also supplements medium-to-long-term base money through net injection, effectively smoothing the funding gaps caused by tax payments, accelerated government bond issuance, and seasonal factors.

Furthermore, Dong noted that the 6-month tenor extends into early 2027, which not only avoids the disturbance to market expectations from frequent short-term instrument operations but also provides a more stable funding environment for the economic recovery in the second half of the year, reflecting the central bank's confidence in macroeconomic fundamentals and its high emphasis on financial stability.

Looking ahead, Ming expects that long-term liquidity tools such as the Medium-term Lending Facility (MLF) and government bond purchases in July will also maintain relatively active operations.