The People’s Bank of China conducted a 1 trillion yuan (≈$140B) 3-month reverse repo on June 6, marking its largest single liquidity injection this quarter. This extended 91-day tenor operation, executed through competitive bidding, aims to preemptively address mid-year funding needs including corporate tax payments and quarter-end financial assessments. The move demonstrates the central bank’s preference for targeted, longer-duration liquidity tools over blanket stimulus measures.
The operation successfully anchored short-term rates, with the 7-day repo rate falling 12bps to 2.15% immediately after the announcement. By maintaining its multiple-price bidding mechanism, the PBOC continues balancing two key objectives: ensuring adequate credit availability while preventing excessive leverage buildup. The timing reflects heightened vigilance ahead of potential summer volatility in bond markets and foreign exchange flows.
This substantial injection complements May’s 50bps RRR cut, showcasing the PBOC’s layered approach to monetary operations. The 3-month duration specifically targets projected funding gaps through Q3 without committing to longer-term policy loosening. Market participants now watch whether these calibrated measures will suffice to maintain stability amid evolving domestic growth signals and global monetary policy divergence.
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