MNI: China Brings Back 28-Day Reverse Repos to Help Liquidity

BEIJING (MNI) – The People’s Bank of China injected CNY75 billion via 28-day reverse repos at open-market operations Tuesday – the first use of the maturity in a year.
Its reintroduction was expected. The PBOC gauged bank demand for the longer-maturity product Monday.
PBOC open-market operations Tuesday and Thursday mostly don’t include the 28-day maturity. It is typically offered before the Chinese New Year or other important holidays.
The PBOC last used the 28-day reverse repo in February 2015 – also before the Chinese New Year.
The weeklong celebration is probably the most important holiday in China and sees hundreds of millions traveling for family reunions as well as an increase in demand for cash as people pay for shopping, travel and hongbao (red envelopes).
But the 28-day reverse repo has cast a shadow over the possibility of a cut in bank deposit-reserve ratios. Investors fear the PBOC may use the longer-maturity reverse repo to cover liquidity during the new-year holiday and refrain from cutting bank deposit reserves.
The PBOC also injected another CNY80 billion via seven-day reverse repos at Tuesday’s open-market operations.
There will be more 28-day reverse repos until the Chinese New Year holiday to help interbank liquidity, traders expected.
The benchmark seven-day-repo rate rose as high as 3.9% Monday – its highest since October and threatening 4% – which is believed to be the PBOC’s comfort-zone ceiling.
The PBOC injected CNY55 billion via three-day Short-Term Liquidity Operations to help liquidity late Monday.
The original article is available at

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