Chinese Central Bank Undertakes 2 Billion Yuan in 7-Day Reverse Repos, Keeps Rates Steady

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The People’s Bank of China (PBOC) undertook 2 billion yuan in 7-day reverse repo operations on Wednesday 24 August.

PBOC said that its open market operations on Wednesday were for the purpose of maintaining rationally ample liquidity in the banking system. The move coincided with the maturation of 2 billion yuan in reverse repos, and resulted in no net change in liquidity.

The rate for the reverse repos was 2.0%, on par with the rate for the last round of open market operations held on 16 August.

PBOC’s open market operations on 16 August saw 10 basis point cuts to the rates for both 1-year medium-term lending facilities (MLF) and 7-day reverse repos, to 2.75% and 2.00% respectively.

The reduction in policy rates was followed by declines in the benchmark loan prime rates (LPR’s). The loan prime rates (LPR’s) announced by Chi­na’s Na­tional In­ter­bank Fund­ing Cen­ter (全国银行间同业拆借中心) on 22 August were 3.65% for the 1-year LPR and 4.3% for the 5-year LPR.

The 1-year LPR fell 5 basis points compared to the print of 3.7% in July, while the 5-year LPR marked a reduction of 15 basis points compared to the print of 4.45% last month.

On 23 August the overnight Shibor rate fell 3.43 basis points to 1.109%, while the 7-day Shibor fell 0.99 basis points to 1.499%.