MNI BRIEF: PBOC Launches Outright Reverse Repo For Liquidity

MNI (BEIJING) - The People’s Bank of China revealed Monday it would add outright reverse repo to its monetary policy toolkit to help maintain adequate liquidity in the banking system, targeting trades with primary dealers in its open market operations.

The PBOC will conduct the trades once a month with a maturity period not exceeding one year, a statement on the PBOC's website said, noting the outright reverse repo will use a fixed amount, rate bidding and multiple-price bidding, with treasury, local government, financial, and corporate bonds used as collateral.

Citing experts, the PBOC run Finance News service explained the current pledged repo freezes bond collateral in the cash borrowers' account, potentially impacting the rights of the cash lender in extreme cases such as defaults. The new tool will enhance the liquidity, safety, and internationalisation of the interbank market, the service noted. (See MNI: Reforms Needed To Consolidate China’s Stock Rally)