People’s Bank of China injects 300bn yuan through 14-day reverse repos.
On Friday the Bank announced it’d be shifting the 14-dayers to:
- fixed amounts
- rate bidding
- timing and scale to respond to liquidity needs
And, indeed, the PBOC says today’s 14-day reverse repo operation was conducted through fixed-volume, interest-rate bidding with multiple-price allocation.
A 14-day reverse repo operation is a short-term loan to banks using government securities as collateral — essentially a way to inject liquidity into the financial system.
-
Fixed-volume means the PBOC set the total size of funds to be provided in advance.
-
Interest-rate bidding means banks submitted bids indicating the interest rate they were willing to pay.
-
Multiple-price allocation means different banks could receive funds at different rates, depending on their bids, rather than everyone getting the same single rate.
So, in short: the PBOC lent a set amount of money to banks for 14 days, allocated at different rates depending on the bids, to manage short-term liquidity in the market.
This article was written by Eamonn Sheridan at investinglive.com.
