PBOC injects funds via reverse repos at flat rates

Source: Xinhua | 2018-06-15

CHINA’S central bank continued to inject liquidity into the financial system via open market operations, with rates flat despite an interest rate hike in the US.

The People’s Bank of China pumped 150 billion yuan (US$23.5 billion) into the market through reverse repos, with 80 billion yuan of contracts maturing, a net injection of 70 billion yuan.

The PBOC conducted 70 billion yuan of seven-day reverse repos at an interest rate of 2.55 percent, 50 billion yuan of 14-day reverse repos at 2.7 percent, and 30 billion yuan of 28-day operations at 2.85 percent. All rates were flat from previous operations.

The Federal Reserve on Wednesday raised short-term interest rates by a quarter of a percentage point, its second rate hike this year and the seventh since late 2015.

Yesterday’s operations followed net injections of 30 billion yuan on Tuesday and 70 billion yuan on Wednesday.

A reverse repo is a process by which the central bank bids and buys securities from commercial banks, with an agreement to sell them back in the future.

Analysts believe the moves were made to stabilize market hopes as liquidity demand could rise.