China's Central Bank Conducts 800 Billion Yuan Reverse Repo Operation

On April 3, China's central bank announced an 800 billion yuan three-month reverse repo operation. According to Jin10, with 1.1 trillion yuan maturing this month, the operation resulted in a net withdrawal of 300 billion yuan. Recently, the financial market has remained loose, with interest rates hovering around a low of 1.2%. Following the Lunar New Year, cash returned to banks, coupled with concentrated fiscal spending at the end of the quarter, leading to ample funds for financial institutions since April, and market interest rates continued to decline. Data shows that on April 3, the overnight rate DR001 fell to approximately 1.23%, marking the lowest level this year, while the one-year interbank certificate of deposit issuance rate for national banks dropped below 1.50%, a historic low. Market experts indicate that under these circumstances, financial institutions' demand for central bank liquidity has decreased, and the reduction in tool size was anticipated. The three-month reverse repo primarily addresses seasonal factors. Historically, the impact of cash injection and withdrawal around the Lunar New Year is significant, with high demand for the three-month reverse repo in January and February before the holiday, and a decline in demand after April is a historical norm.