China Reverse Repo Rate

The People’s Bank of China (PBoC) today injected a net CNY 958.4 billion of cash through seven-day reverse repurchase agreements in its daily open market operations. This represented the second-largest cash injection ever recorded, according to Bloomberg News. The operation aimed to offset the impact of the expiration of medium-term lending facilities (MLF), increased cash demand ahead of the Lunar New Year holidays, and peak tax season pressures. Earlier in the week, a cash shortage drove seven-day interbank funding rates to their highest level in over a year. The reverse repurchase agreements partially replaced the expiration of approximately CNY 955 billion in medium-term financing. In recent months, the central bank has shifted its policy approach, reducing reliance on the MLF as its primary tool and increasingly using the seven-day reverse repo rate to guide market borrowing costs. The seven-day reverse repo rate has remained steady at 1.5% since a 20bps cut in late September.