(Yicai) Sept. 25 -- The People’s Bank of China injected CNY600 billion (USD84.3 billion) through its medium-term lending facility today, easing funding pressures ahead of quarter-end and the National Day holiday. This marks the seventh consecutive month of expanded medium-term liquidity.

With CNY300 billion in MLF maturing this month, the net injection of one-year funds totaled CNY300 billion, Yicai learned.

The central bank also conducted CNY483.5 billion in seven-day reverse repos at a rate of 1.4 percent, nearly offsetting the CNY487 billion in reverse repos maturing today.

The operations helped relieve capital strain at the end of the month. More than CNY2.1 trillion (USD295.2 billion) in central bank funds will mature this week, the largest single-week amount this year, including over CNY1.8 trillion in reverse repos and CNY300 billion in MLF.

Since reducing the reserve requirement ratio in May to release CNY1 trillion in long-term liquidity, the PBOC has ramped up net injections for nearly four months. The intensity of medium-term liquidity support has notably increased over the past two months, signaling a clear policy stance.

Several factors are driving the PBOC’s actions, according to Wang Qing, chief macro analyst at Golden Credit Rating International. These include a peak period for government bond issuance and tighter banking system liquidity, partly due to industrial adjustments linked to “anti-involution” measures and a buoyant stock market. Anti-involution refers to efforts to curb excessive competition that suppresses profitability.

Wang added that the PBOC’s moves reflect a continued supportive monetary policy aimed at ensuring a stable macroeconomic environment.

Toolbox Optimization

Beyond liquidity injections, the PBOC also optimized its policy tools this month. It resumed 14-day reverse repos on Sept. 19 and conducted another CNY300 billion in such operations on Sept. 22.

The central bank typically deploys these tools about a week before major holidays to prevent post-holiday volatility caused by concentrated maturities, analysts said.

These adjustments not only stabilize short-term market liquidity but also reinforce the seven-day reverse repo rate as a medium- and long-term pricing anchor, analysts added.

Xiao Jinchuan, chief macro analyst at Huaxi Securities, noted that similar operations are usually timed ahead of holidays like the Chinese New Year and National Day to ensure a smooth liquidity transition and minimize surprises from maturing funds.

Looking ahead, analysts expect the PBOC to continue prioritizing liquidity stability. Cross-quarter interest rate fluctuations are likely to remain manageable, and the 14-day reverse repo rate may fall.

Ming Ming, chief economist at CITIC Securities, said the 14-day rate could decline by about 5 basis points in the short term.

Ming added that with tools like outright reverse repos, MLF, and potential further injections of medium- and long-term funds to lower banks' liability costs, there is room for the 14-day rate to decrease further over time.

Editor: Emmi Laine