China's PBOC introduces new liquidity tool 'outright reverse repos'

The central bank will use these to trade with primary dealers in open market operations, the bank said in a statement.

Outright reverse repos will be carried out once a month, with a tenor of no more than a year.

The tool is considered as a further enrichment of the country's monetary policy toolkit following the introduction of temporary repos, temporary reverse repos and the buying and selling of treasury bonds, a state-controlled media outlet reported.

It is expected to better offset the concentrated maturity of the medium-term lending facility (MLF) before the end of the year.

There will be 2.9 trillion yuan ($406.69 billion) of maturing in the MLF in November and December this year, accounting for 40 per cent of the current MLF balance, according to Wind data. This, coupled with other factors, may pose significant pressure to the banking system's liquidity at year-end.

The introduction of the new tool will help maintain reasonable and ample liquidity at the end of 2024, providing a favorable monetary and financial environment for stable economic growth, said analysts.

The new tool will help boost the development of the outright repo business and enhance the liquidity, safety and internationalisation level of China's interbank market, they added.

Fibre2Fashion News Desk (DS)