Global Market: China's central bank expands liquidity toolkit with first-ever overnight reverse repos

China's central bank on Monday launched overnight reverse repo operations for the first time, offering 300 billion yuan ($44.13 billion) to financial institutions as part of its liquidity management framework, according to an official statement reported by Reuters.

The People's Bank of China (PBOC) did not disclose the borrowing cost for the newly introduced overnight reverse repos.

Separately, the central bank injected an additional 157.5 billion yuan into the banking system through seven-day reverse repos while keeping the interest rate unchanged at 1.4%, according to the statement.


The move marks the debut of overnight reverse repo operations by the PBOC, expanding its toolkit for managing short-term liquidity in the financial system. Reuters reported that the central bank announced the operations through an online statement but did not provide further details on the pricing of the overnight facility.

China's central bank has been relying on various liquidity operations to maintain ample cash conditions in the banking system while supporting economic growth amid a challenging domestic and global environment.

The introduction of an overnight reverse repo facility is expected to provide the PBOC with greater flexibility in managing short-term funding conditions and smoothing liquidity fluctuations in the interbank market. Market participants will closely monitor how frequently the central bank uses the tool and whether it becomes a regular part of its open market operations, Reuters reported.

The latest liquidity injection comes as Chinese policymakers continue to calibrate monetary support to bolster the economy while maintaining financial stability. Analysts will also watch for any further signals from the PBOC on interest rates and liquidity management in the coming months as authorities seek to support growth without fuelling excessive financial risks.