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PBOC Drains CNY510 Billion From Financial System
Tang Shihua
DATE:  Nov 05 2020
/ SOURCE:  Yicai
PBOC Drains CNY510 Billion From Financial System PBOC Drains CNY510 Billion From Financial System

(Yicai Global) Nov. 5 -- The People's Bank of China pulled CNY510 billion (USD76.3 billion) in liquidity out of the financial system today, as the regulator conducted only a limited amount of open market operations against a large volume of maturing facilities, including reverse repos and medium-term lending facilities.

The central bank carried out CNY30 billion seven-day reverse repo operations today against CNY140 billion maturing from previous ones, effectively siphoning off CNY110 billion.

The bank held back from from further action against a maturing CNY400 billion worth of MLF, withdrawing that amount by so refraining.

The bank will delay its new MLF operation to Nov. 16 after another batch of previous MLFs falls due, it said in a statement today explaining its inaction.

The bank cumulatively injected CNY190 billion liquidity via open market operations last week, but since then has only infused CNY20 billion over this week’s first three days.

A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future. In this way, commercial banks can raise short-term capital. It is the equivalent of a short-term loan with the securities.

The People's Bank of China devised the MLF operation in 2014 to provide liquidity support to qualified commercial banks focused on small city or rural economies. It usually carries out such operations once or twice per month.

Editor: Ben Armour

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Keywords:   Open Market Operation,Reverse Repo,MLF,Market Liquidity,PBOC