(Yicai) June 15 -- China's central bank ended a three-month streak of net liquidity withdrawals through six-month outright reverse repurchase operations after rolling over CNY600 billion (USD88.8 billion) of maturing funds on a one-for-one basis.

The People’s Bank of China conducted a CNY600 billion six-month outright reverse repo operation today through interest-rate bidding with multiple winning price levels. As CNY600 billion of the same instrument matured during the period, the operation resulted in neither a net liquidity injection nor a net withdrawal.

Today’s move indicates a reversal of previously loose liquidity in the market, lessening the need for further reductions in six-month outright reverse repo operations this month, according to Wang Qing, chief macro analyst at Golden Credit Rating International. It also reflects a recent rebound in market interest rates driven largely by the People’s Bank of China's earlier moderation of open-market operations, Wang added.

The PBOC had previously used scaled-back outright reverse repo operations to guide market interest rates back toward policy rates. After remaining below policy rates for more than two months, funding rates have recently risen above them.

Looking ahead, analysts expect the PBOC to maintain its moderately accommodative monetary policy while keeping liquidity at a reasonably ample level. They said the central bank still has room to inject liquidity if funding pressures re-emerge and is likely to continue using reverse repo operations to prevent both excessive tightening and inefficient circulation of idle capital.

Dong Ximiao, chief economist at CMB-China Unicom Consumption Finance, rejected suggestions that the latest operation signals a shift in monetary policy.

In his view, the operation serves two purposes. First, the sustained reduction in outright reverse repo operations has largely achieved the policy goals of curbing idle capital circulation and stabilizing long-term interest rates. Second, maintaining the six-month operation at the same scale provides support for quarter-end liquidity needs and helps avoid market overshooting caused by continued withdrawals of medium- and long-term funds.

Combined with liquidity injections through seven-day reverse repos, the operation helps stabilize short-term interest rates while ensuring medium- and long-term liquidity remains ample, Dong said.

Tan Yiming, chief fixed-income analyst at TF Securities, said the PBOC does not appear intent on continuously tightening liquidity conditions. If liquidity pressures emerge again, the central bank may still have room to increase support. At the same time, it is unlikely to tolerate liquidity remaining at excessively low levels and may use reverse repo operations or other measures to guide market conditions back to an appropriate range while preventing idle capital circulation.

Dong said that, despite the adjustment in liquidity management, the overall stance of monetary policy remains moderately accommodative and supportive. Liquidity conditions have shifted from an exceptionally loose state earlier to a relatively ample range.

Editor: Emmi Laine