(Yicai) April 2 -- A second consecutive day of “tiny” reverse repurchase operations by the People’s Bank of China does not signal tighter liquidity, rather it underscores that market funding conditions remain ample, according to analysts.

The PBOC conducted a CNY500 million (USD72.5 million) seven-day reverse repo operation in the open market today. The 1.4 percent interest rate on the agreements was unchanged from yesterday’s operation of the same size, the central bank said, adding that it would “fully meet the demand of primary dealers.”

As CNY224 billion of reverse repos matured today and CNY78.5 billion yesterday, the PBOC drained CNY223.5 billion and CNY78 billion, respectively, from the market over the two days.

The move followed heaftier liquidity injections at the end of last month and concentrated fiscal spending at the end of the first quarter, resulting in ample liquidity at the start of this month, Yicai learned from financial institutions. Due to their own liquidity management considerations, most institutions did not report their funding needs to the PBOC in the past two days.

Market participants said the wording “fully meet the demand of primary dealers” in the PBOC’s statement also showed that these smaller-sized reverse repos did not tighten liquidity and the bank’s moderately loose monetary policy stance remains unchanged.

Funding indicators also point to ample liquidity. The overnight money-market rates remain low, and in the first two months of this year, the PBOC injected about CNY2 trillion (USD290.5 billion) of medium- and long-term funds using tools such as outright repos and the medium-term lending facility. After the Chinese New Year holiday, households gradually redeposited cash into banks, helping keep liquidity abundant.

Last month, the daily average of DR001 -- the overnight interbank repo rate for depository institutions, was around 1.31 percent -- lower than in January and February. At the start of April, the rate fell below 1.3 percent, while financial institutions’ need to borrow funds dropped significantly.

Zou Lan, a deputy governor of the PBOC, said in January that the goal of open market operations is to guide overnight rates to run near the policy rate. Banking industry experts said the recent “tiny”open-market operations reflect the bank’s increasingly flexible and targeted approach and also show the broader shift in monetary policy toward price-based regulation.

Editor: Emmi Laine