PBoC Continues Zero Reverse Repo Operations

The People's Bank of China (PBoC) left its daily liquidity injections unchanged at zero for a second consecutive session on Thursday, following the first suspension of seven-day reverse repo operations in nearly two years a day earlier. The central bank said the zero-volume operation reflected the needs of primary dealers in open market operations. The move has drawn market attention as it comes despite ample liquidity in the banking system. The consecutive zero operations suggest policymakers are comfortable with current funding conditions and see no immediate need to inject additional cash into the financial system.

The People’s Bank of China (PBoC) announced on Wednesday that it conducted zero reverse repo operations, citing primary dealers' funding needs in its open market operations. The move marked the first time since August 2024 that the central bank injected no liquidity through reverse repos, according to Reuters calculations. The absence of operations suggests that liquidity conditions in the banking system were deemed adequate, reducing the need for short-term cash injections by the PBoC.

The People's Bank of China conducted a CNY 118.6 billion seven-day reverse repo operation on Thursday, December 11, keeping the interest rate unchanged at 1.4%. With CNY 180.8 billion in reverse repos maturing the same day, the operation resulted in a net liquidity withdrawal of CNY 62.2 billion. Meanwhile, the Ministry of Finance announced it will roll over CNY 750 billion in special treasury bonds maturing on Friday. An equivalent amount will be issued to designated banks on the interbank market, comprising CNY 400 billion in 10-year bonds and CNY 350 billion in 15-year bonds. The proceeds will be used solely to repay the maturing principal. The ministry stressed that the rollover is a like-for-like replacement and will not expand the fiscal deficit.