The People's Bank of China will scale back its volume and carry out a 300 billion yuan buyout reverse repurchase operation

China News Service, Beijing, November 4 (Tao Siyue) The announcement issued by the Central Bank of China on the 4th showed that it will carry out a 300 billion yuan (RMB, the same below) buyout reverse repurchase operation on the 5th using a fixed quantity, interest rate bidding, and multiple price winning bids, with a period of 3 months (91 days).

Based on past data, 500 billion yuan of three-month buyout reverse repurchases expired in November. This means that this operation is a continuation of the reduction, with a reduction scale of 200 billion yuan; and the 3-month buyout reverse repurchase volume in October increased by 200 billion yuan.

"The main reason for the reduction and continuation is that market liquidity has adjusted rapidly in the direction of loosening recently." Wang Qing, chief macro analyst of Oriental Jincheng, said that the average value of DR001 (interbank overnight repurchase rate) in October fell sharply compared with September, and there is still a downward trend in November.

He believes that the decline of DR001 is related to the announcement by the Central Bank of China that it will shift the anchor point of the main policy interest rate from 7 days to overnight. During the process of "re-anchoring" the central bank's main policy interest rate, expectations of wider market liquidity continued to ferment and pushed bond market yields downward rapidly. Therefore, the 3-month buyout reverse repurchase in November will moderately "collect water", which will help stabilize market expectations, curb the rapid downward momentum of DR001, and prevent market parties from hyping the reform of the open market operation mechanism as an interest rate cut.