FX.co ★ PBoC to Launch Overnight Reverse Repo Operations

The People’s Bank of China announced it will conduct overnight reverse repurchase operations on Monday and Tuesday to improve short-term liquidity management in the banking system. The move follows remarks by Governor Pan Gongsheng last week that the central bank would expand its short-term liquidity toolkit by introducing overnight reverse repos and narrowing the interest-rate corridor for its temporary repo and reverse repo facilities.

According to the PBoC, the overnight reverse repos will be executed through fixed-rate, quantity-based bidding. Pan also said the central bank will refine its temporary overnight repo and reverse repo operations by narrowing the interest-rate corridor to 50 basis points from 70 basis points. This adjustment is intended to strengthen interest-rate guidance and enhance the effectiveness of monetary policy implementation.