The People's Bank of China will launch a 700 billion yuan MLF operation

China News Service, Beijing, October 23 (Tao Siyue) The People's Bank of China announced on the 23rd that in order to maintain sufficient liquidity in the banking system, it will launch a 700 billion yuan (RMB, the same below) MLF (medium-term lending facility) operation on the 26th with a fixed quantity, interest rate bidding, and multiple price winning bids, with a term of one year.

Past data shows that 900 billion yuan of MLF expires this month, which means this operation is a shrinking continuation. The Oriental Jincheng research team believes that there are three main reasons for the net withdrawal of MLF of 200 billion yuan in October.

First, the volume of buyout reverse repurchases for two types of maturities has been increased and renewed this month, with an additional volume of 400 billion yuan; second, the recent scale of policy bond issuance is relatively moderate, and the moderate reduction of MLF will not affect the smooth issuance of government bonds; third, affected by various factors, market liquidity after the holiday is loose, and DR001 (interbank overnight repurchase rate) deviates downward to a certain extent from the center of the policy interest rate.

Looking forward, "the central bank will continue to inject liquidity on a larger scale." Wang Qing, chief macro analyst of Oriental Jincheng, believes that the fourth quarter is the peak period of government bond financing this year, and 800 billion yuan of new policy financial instruments will continue to be released, all of which require the central bank to provide support in terms of liquidity.