(Yicai) Aug. 14 -- China's central bank will carry out a six-month outright reverse repurchase operation, rolling over CNY1 trillion (USD147.4 billion) of maturing funds on a one-for-one basis to maintain ample liquidity in the banking system.

The CNY1 trillion six-month outright reverse repo operation will be conducted with a fixed quantity through interest-rate bidding with multiple winning price levels today, the People's Bank of China announced yesterday.

On Aug. 5, the PBOC carried out a CNY500 billion (USD73.7 billion) three‑month outright reverse repo operation. As only CNY300 billion of the same instrument matured in the period, the operation resulted in a net liquidity injection of CNY200 billion into the banking system, making it the second month in a row the central bank rolls over maturing tools with increased volume, with the increment unchanged from July.

DR001 -- the overnight interbank repurchase rate for depository institutions -- has kept trading below the policy rate since Aug. 4, indicating persistently ample market liquidity and making additional liquidity injections unnecessary, said Wang Qing, chief macro‑economy analyst at Golden Credit Rating International, regarding the PBOC's latest move refraining from another volume‑increase rollover.

The PBOC's injection on Aug. 5 aimed to proactively offset medium‑ and long‑term liquidity gaps, counteracting this month's CNY2.77 trillion net government bond financing and CNY1.9 trillion maturing medium-term lending facility funds, noted Dong Ximiao, chief economist at China Merchants Union Consumer Finance.

The latest same‑size rollover precisely offsets maturing principal amounts, preventing massive liquidity drainage from expiring reverse repos from roiling market funding conditions and avoiding excessive liquidity injection that could trigger easing expectations, Dong noted. Both measures show the PBOC's policy resolve to keep market liquidity ample by "flattening peaks and filling valleys," Dong added.

However, government‑bond issuances and the rollout of CNY800 billion of new policy‑driven financial tools will require liquidity support from the central bank, Wang pointed out, adding that he expects the PBOC to continue to rollover maturing medium‑term liquidity instruments, including outright reverse repos and MLF, with increased volume to continue net injections in near future.

Editors: Tang Shihua, Martin Kadiev