Source: Wall Street See
Author: Li Xiaoyin.

On Friday, October 25, the People's Bank of China conducted a 700 billion yuan Medium-term Lending Facility (MLF) operation, with the interest rate unchanged at 2.00%. This month, 789 billion yuan of MLF matured, resulting in a net withdrawal of 89 billion yuan RMB from this MLF operation.

The central bank announced that in order to maintain a reasonably ample liquidity in the banking system, a 700 billion yuan Medium-term Lending Facility (MLF) operation was conducted on October 25, with a 1-year term, a maximum bid rate of 2.30%, a minimum bid rate of 1.90%, and a bid rate of 2.00%. After the operation, the balance of the Medium-term Lending Facility was 6789 billion yuan.

On the same day, the central bank also announced to conduct a 292.6 billion yuan reverse repurchase operation through fixed-rate, quantity-based bidding.

Public data shows that the last 1-year MLF bid rate was 2.00%, with a total of 789 billion yuan of MLF maturing in October and 108.4 billion yuan of 7-day reverse repurchase maturing today.

Chief economist Mingming of Citic Securities stated that the central bank continues to adjust the maturity structure of financial operations, further reducing the impact of MLF on the liquidity market. This month, there was a net withdrawal of 89 billion yuan from MLF, while the central bank made a net injection of 184.2 billion yuan through reverse repurchase on the same day, resulting in an overall net capital injection of 95.2 billion yuan.

Mingming stated that the central bank's shift from loosening to tightening operations is partly to gradually reduce the impact of MLF tools on the liquidity market, and also to avoid significant impact of reducing MLF on the liquidity market during tax payment and fund crossing months. It strengthens the guiding significance of reverse repo rates on market rates, and it is expected that the excess in open market operations on the 25th of each month while reducing MLF will become a norm.

Editor/Jeffy