PBOC Injects Net CNY90 Bln In OMOs Friday; New 2-Month Repos

     BEIJING (MNI) - The People's Bank of China injected CNY60 billion in

seven-day reverse repos, CNY30 billion in 14-day reverse repos and CNY50 billion

in 63-day reverse repos via its open-market operations Friday, Wind Information,

a Shanghai-based financial data provider, said.

     This resulted in a net injection of CNY90 billion for the day, as a total

of CNY50 billion in reverse repos mature on Friday. 

     This is the first time that the PBOC used a two-month (63-day) reverse

repos in its open market operations.

     "The two-month reverse repos fills in the space between reverse repos and

Medium-term Lending Facility [instruments], as the longest reverse repo before

was 28-day, while the shortest MLF loan has a duration of three months," China

International Capital Corporation said in a note on Thursday. "The aim is to

stabilize liquidity condition rather than raise borrowing costs for the banking

system."

     The new type of reverse repos is in line with the PBOC's second quarter

monetary policy report, which mentioned the central bank would research and

introduce reverse repos with new durations to improve the stability of liquidity

conditions and direct financial institutions to optimize the term structure of

their assets and liabilities.

     The PBOC injected a total of CNY390 billion in liquidity via reverse repos

this week.

     The CFETS-ICAP money-market sentiment index ended at 55 on Thursday, up

from 45 at Wednesday's close. The lower the reading the better the liquidity

conditions in the interbank market.

     The PBOC is expected to make an official announcement on its official

website about this morning's OMO around 9:45a.m., Beijing time.

     The benchmark seven-day repo average was last at 2.6955%, compared with

2.9714% on Thursday.

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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