China’s Interbank Overnight Repo Rate Drops Below 1% For First Time Since 2021

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China has just seen one of its key interest rates sink beneath the 1% threshold for the first time since early 2021.

On 27 July the weighted average for China’s DR001 overnight repo rate sank to 0.9819%, for its lowest level since 8 January 2021. The DR001 rate is considered a key indicator of liquidity on the Chinese interbank market.

The weighted average for China’s DR007 seven-day repo rate stood at 1.6236% on the same date.

On 27 July, the overnight Shanghai Interbank Offered Rate (SHIBOR) fell 1 basis point to 1.008%, while the 7-day rate fell 1.9 basis points to 1.613%, and the 14-day rate fell 0.5 basis points to 1.649%.

27 July also saw the People’s Bank of China (PBOC) undertake 2 billion yuan in 7-day reverse repo operations with a bid rate of 2.10%. Given the maturation in 3 billion yuan in reverse repos on the same date, the central bank made net liquidity withdrawals of 1 billion yuan.

Earlier in the month Zou Lan (邹澜), head of PBOC’s monetary policy department, said that the DR007 rate falling beneath the open market rate was a sign that liquidity is at rationally ample or even slightly excessive levels.