The People’s Bank of China (PBOC) has used reverse repos to inject liquidity into the Chinese banking system as the Spring Festival vacation comes to an end.
On January 29, the Chinese central bank announced via its official website that in order to maintain stable liquidity at the end of the month, it had conducted 128 billion yuan in 7-day reverse repurchase operations via interest rate bidding. The interest rate was 2%, which was the same as the rate for the pervious round of open market operations.
Given that no reverse repos were due on the same date, the move resulted in a single-day net injection of 128 billion yuan in liquidity.
The day prior saw across the board declines in the Shanghai Interbank Offered Rate (Shibor), including a fall in the overnight rate of 40.20 basis points to 1.432%; a 7.30 basis point fall in the 7-day rate to 1.915%. The key DR007 repo rate saw its weighted average fall to 1.8679.
