China sets overnight reverse repo rate steady at 1.25pc, sources say

China's central bank conducted an overnight reverse repo operation on Wednesday by setting the borrowing cost at 1.25 percent, unchanged from the previous such operation in late June, people with knowledge of the matter said.

The People's Bank of China said it injected 206.5 billion yuan (HK$239.17 billion) via seven-day reverse repos at 1.40 percent. It also injected an additional 600 billion yuan through the overnight tenor without disclosing the borrowing cost, according to a statement published earlier in the session.

All the sources spoke on condition of anonymity as they are not authorised to discuss the topic. The PBOC did not immediately respond to a Reuters request for comment.

The PBOC said last week that it would conduct overnight reverse repo operations from July 29 to 31 and on August 3 to inject a total 2.1 trillion yuan through the overnight tool into the banking system.

Wednesday's operation came after PBOC Deputy Governor Zou Lan's comments earlier this month about gradually increasing the frequency of overnight reverse repo operations to flexibly manage short-term liquidity conditions.

"The focus of overnight reverse repo operations is not on the interest rate itself, but on their ability to regulate ultra-short-term liquidity," Zou said.

"At this stage, the seven-day reverse repo rate remains the primary policy rate."

Reuters

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