PBC Conducts Contractionary Repo Operations Amid Sufficient Market Liquidity

On April 14th, the People’s Bank of China (PBC) issued an announcement on open market outright repo tenders, stating that it would conduct 500 billion yuan of outright repo operations with a 6-month term (183 days) on April 15th, 2026, through fixed quantity, interest rate tender and multiple price winning methods to maintain sufficient liquidity in the banking system.

According to Securities Daily, the maturity scale of 6-month outright repos this month stands at 600 billion yuan. After the above operation, the 6-month outright repos will achieve a net withdrawal of 100 billion yuan. In addition, the PBC had carried out 800 billion yuan of 3-month outright repo operations on April 7th, realizing a net withdrawal of 300 billion yuan after offsetting the maturing 1.1 trillion yuan of 3-month outright repos.

Dong Ximiao, chief economist of China Merchants Union Consumer Finance, stated in an interview with Securities Daily that the contractionary rollover of outright repos this month is mainly due to sufficient market liquidity. Recently, DR001 (the weighted average interest rate of overnight pledged repos in the interbank market) has been running at a low level of 1.2% to 1.25%, far below the policy interest rate, reflecting the current ample market liquidity.

"The core purpose of the contractionary operation is to guide the main market interest rates to gradually return to around the policy interest rate from an excessively low level, avoiding the market from forming an one-sided expectation of excessive easing," Dong noted. He added that the PBC has adopted a combination of "minimum-volume repos (short-end) + contractionary rollover of outright repos (medium and long-end)", achieving separation of quantity and price as well as matching of short and long terms, which reflects the principle of transforming from quantitative regulation to price-based regulation.

Data from Wind shows that in the 9 trading days from April 1st to April 14th, the PBC conducted 5 billion yuan of repo operations on 6 trading days, 10 billion yuan on 2 trading days and 20 billion yuan on 1 trading day, with a total investment of 70 billion yuan. Meanwhile, the maturity scale of repos during the same period was 753.2 billion yuan, achieving a net withdrawal of 746.2 billion yuan after offsetting.

An industry expert told Securities Daily that the recent decline in the volume of 7-day open market repo operations is a reflection of sufficient liquidity in the banking system and optimized structure of liquidity injection by the central bank. An expert from the National Institution for Finance & Development also noted that the moderate easing orientation of monetary policy has not changed, and the reduction is a normal adjustment rather than a tightening of total volume.

Dong Ximiao further emphasized that the recent contractionary operations are not a signal of liquidity tightening. In the short term, against the background of rising external uncertainties, monetary policy will also tilt towards stabilizing prices periodically while maintaining sufficient liquidity, and the timing of interest rate and reserve requirement ratio cuts may be delayed.