PBOC to Conduct Overnight Reverse Repo Operations from Aug 27 to Sep 1, Daily Cap at 600 Billion Yuan

The People's Bank of China (PBOC) will continue conducting overnight reverse repo operations at the end of August.

On August 24, the PBOC announced in an open market operation notice that, to better match the banking system's short-term liquidity needs, it will conduct overnight reverse repo operations from August 27 to September 1, using fixed-rate, quantity-tender methods, with a daily cap of 600 billion yuan.

This month, the central bank also conducted overnight reverse repo operations mid-month for the first time, carrying out daily operations capped at 600 billion yuan on August 14 and from August 17 to August 19.

To further improve the interest rate adjustment mechanism and enrich the range of policy tools, the PBOC added overnight reverse repo operations in June to better match financial institutions' short-term liquidity needs, and conducted the first such operation at the end of June. In its latest monetary policy implementation report, the central bank noted that in recent years, overnight transactions have accounted for more than 90% of repo trading in the money market, making overnight financing an important tool for institutional liquidity management. Particularly at month-end, tax payment periods, and other key points, some institutions' short-term liquidity needs may last only two to three days. Using overnight operations at these times can improve liquidity management efficiency and reduce financial institutions' costs. Going forward, the PBOC will gradually increase the frequency of overnight reverse repo operations in line with primary dealer demand, further smoothing the transmission from policy rates to market rates.