China’s central bank debuts overnight reverse repo operation, withholding key interest rate

Published Mon, Jun 29, 2026 · 10:43 AM

[BEIJING] China’s central bank held its debut overnight reverse repo operation without disclosing the rate of interest it charged on its new instrument, in a surprise move to traders awaiting guidance on borrowing costs.

The People’s Bank of China (PBOC) said it conducted 300 billion yuan (US$44 billion) of overnight reverse repurchase agreements in open market operations on Monday (Jun 29), according to a statement. It also provided 157.5 billion yuan of seven-day reverse repos at an unchanged rate of 1.4 per cent.

The PBOC announced earlier it’s introducing the overnight tenor into its open-market operations on Jun 29 to Jun 30, utilising a fixed-rate format for primary dealers to bid for funds. The market was expecting the central bank to set the overnight reverse repo rate around 1.35 per cent, according to a Bloomberg survey on Friday.

“The overnight reverse repo is primarily a liquidity tool aiming at smoothing seasonal funding stress, rather than a tool to signal a particular policy stance,” said Frances Cheung, head of foreign exchange and rates strategy at OCBC. “The timing of the operations today and tomorrow ahead of the half-year end – and the amount bigger than the seven-day reverse repo – both support this notion.”

Traders and analysts are watching the operation closely in search of insights into the PBOC’s plans for managing liquidity. The cost of overnight borrowing in the interbank market has become more volatile since May, as the central bank sought to ease a glut of money in the financial system, with demand for cash typically rising at the end of each quarter.

The new facility gives the PBOC better control over short-end borrowing costs and allows it to smooth out any big swings in market liquidity.

Lynn Song, chief Greater China economist at ING Bank, said it’s possible the rate on the new operation will be revealed later and may have been kept undisclosed to avoid “diluting” the significance of the seven-day benchmark.

“Given the overnight rate is still the most liquid and important rate for trading activity, it makes sense this will eventually be the level that policymakers seek to control,” Song said. “However, it probably will take some time. We probably need some track record and maturity for the overnight repo facility and how it affects market overnight rates before this shift is made.” BLOOMBERG