PBOC Makes Biggest Ever One-Day Reverse Repo to Create Liquidity for Chinese New Year
Duan Siyu
DATE:  Jan 17 2019
/ SOURCE:  yicai
PBOC Makes Biggest Ever One-Day Reverse Repo to Create Liquidity for Chinese New Year PBOC Makes Biggest Ever One-Day Reverse Repo to Create Liquidity for Chinese New Year

(Yicai Global) Jan. 17 -- China's central bank has made its largest ever single-day reverse repo, injecting CNY570 billion (USD84.3 billion) to the market as it looks to generate liquidity before the upcoming Chinese New Year holiday.

The move added CNY560 billion in liquidity yesterday, as just CNY10 billion (USD1.5 billion) in reverse repos expired that day. The People's Bank of China had conducted reverse repos worth CNY100 billion and CNY180 billion in the two days previous.

"China is in a taxation peak and experiencing a rapid downturn in banking liquidity," the central bank said in a statement the same day, adding that reverse repos can "keep a reasonable and sufficient liquidity level in the banking system."

The PBOC expects a rise in demand for cash in the build up to the Chinese New Year, which falls on Feb. 5 this year, one insider told Yicai Global. He predicts the central bank will make further injections in the second half of January before the week long holiday celebrating the event -- the turn of the lunar year -- begins on Feb. 4.

The central bank is very likely to continue offering support for market liquidity considering the impact of the volume of loans granted and the maturity of monetary policy tools at the beginning of the year, Ming Ming, chief fixed income analyst at Citic Securities, told Yicai Global.

Another source familiar with the market added that the PBOC also used a 28-day reverse repo for the first time in seven months this week to further ensure liquidity before the holiday.

Editor: James Boynton

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Keywords:   PBOC,Reverse Repo