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January 3, 2019

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PBOC steps in to drain more liquidity

China’s central bank drained liquidity from the financial system yesterday, with more reverse repos maturing than conducted.

The People’s Bank of China conducted 30 billion yuan (US$4.4 billion) of seven-day reverse repos at an interest rate of 2.55 percent and 10 billion yuan of 14-day reverse repos at 2.7 percent, according to a PBOC statement.

The interest rates were unchanged from previous operations.

As reverse repos worth 110 billion yuan matured yesterday, the PBOC effectively withdrew 70 billion yuan of funds from financial institutions.

The PBOC said yesterday’s operation aimed to maintain “reasonably abundant liquidity” in the banking system.

Through reverse repos, the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.


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