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PBOC Halts Incremental Reverse Repos in September, Shifts to Rollover
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In September, the People's Bank of China (PBOC) rolled over both tenors of outright reverse repos in equal amounts, ending two months of increased-volume rollovers. This shift reflects a 'tightening long-term, loosening short-term' liquidity management approach. As of 3:00 PM on September 15, the overnight pledged repo rate (DR001) was 1.4281% and the 7-day rate (DR007) was 1.4234%, fluctuating slightly around the policy rate center. Wang Qing, Chief Macro Analyst at Dongfang Jincheng, noted that market liquidity is relatively ample. To prevent major market rates from deviating significantly downward from the policy rate, the PBOC has conducted minimal or zero-volume seven-day reverse repo operations since early September, aiming to guide DR001 to run steadily around the policy rate. The equal-amount rollover of outright reverse repos also reflects this regulatory orientation. Wang Qing added that macro policies will further focus on stabilizing growth, including accelerating government bond issuance and deploying 800 billion yuan in new policy-based financial instruments, which requires the central bank to provide liquidity support.
Source report
In September, both tenors of outright reverse repos were rolled over in equal amounts, ending the previous two-month trend of rollovers with increased volumes. The three-month outright reverse repo in September was also rolled over in an equal amount.
Current Funding Market Rates
As of 3:00 PM, the intraday weighted average rates were as follows:
- DR001 (overnight pledged repo rate in the interbank market): 1.4281%
- DR007: 1.4234%
Funding market rates are currently fluctuating slightly around the central level.
Analyst Commentary
Wang Qing, Chief Macro Analyst at Dongfang Jincheng, provided the following insights:
- Market liquidity is relatively ample.
- To prevent major market rates from deviating significantly downward from the policy rate center, the People's Bank of China has mostly conducted minimal-volume or zero-volume seven-day reverse repo operations since early September.
- This approach aims to guide the DR001 to run steadily around the policy rate.
- The equal-amount rollover of both tenors of outright reverse repos in September reflects this regulatory orientation.
Policy Outlook
There remains a need for policy support to stabilize growth. Wang Qing analyzed that, overall, macro policies will further focus on stabilizing growth going forward. This includes:
- Accelerating government bond issuance
- Speeding up the deployment of the RMB 800 billion new policy-based financial instruments
These measures require the central bank to provide liquidity support.
(Source: Yicai)
Source
金十数据Eastern
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