The People's Bank of China (PBOC), which is the country's central bank, on Monday conducted 300 billion yuan ($41.2 billion) of 14-day reverse repos, in the first such operation since it adjusted the tool's bidding rules last week.
The operation was carried out through fixed-volume, interest rate tenders with multiple bid prices, the PBOC said.
The central bank last week changed the bidding mechanism for 14-day reverse repos from a single bid price to multiple bid prices. The move allows institutions greater flexibility in market-based pricing and better reflects their differentiated funding needs.
The PBOC typically launches 14-day reverse repos ahead of major holidays such as the National Day holiday and the Spring Festival to inject liquidity into the banking system.
"The launch of the 14-day reverse repo came slightly earlier than it has in previous years, helping ensure stable liquidity through to the end of the quarter and the holiday period, and reflecting a moderately loose monetary policy stance," said Wang Qing, chief macro analyst at Golden Credit Rating.
Wang added that the move is a further refinement of the central bank's liquidity management toolbox and reinforces the policy role of the seven-day reverse repo rate.
In addition to the 14-day operation, the central bank also conducted 240.5 billion yuan of seven-day reverse repos on Monday through fixed-rate, volume tenders.
A reverse repo is a process in which the central bank purchases securities from commercial banks through a bidding process, with an agreement to sell them back in the future.
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