The People’s Bank of China will conduct a fixed‑amount, fixed‑rate, multi‑price auction for a ¥10,000 billion buyout reverse repo on 13 February, supplying liquidity to the banking system for 182 days. The central bank said the move is intended to keep system liquidity ample, a theme Beijing has emphasised as it pursues an “appropriately loose” monetary stance.
A buyout reverse repo (买断式逆回购) is an outright purchase of securities rather than a traditional repo, which means the liquidity provided is more durable and not tied to short‑term collateral rehypothecation. By choosing a six‑month maturity the PBOC is inserting medium‑term funds into banks’ balance sheets, reducing rollover risk for lenders and signalling a willingness to support credit supply beyond the usual short‑term plumbing operations.
The operation follows a string of recent liquidity measures: the central bank earlier conducted 7‑day reverse repos totalling ¥1,665 billion at an unchanged 1.40% rate, and has carried out net injections exceeding ¥1 trillion this week. Chinese 10‑year government bond yields have moved lower alongside these actions, sliding below 1.78%, while the onshore and offshore renminbi have recently appreciated past the 6.91 per US dollar mark, reflecting the interaction of domestic policy and external flows.
For markets and borrowers the policy is supportive. Longer‑dated, large‑scale injections lower banks’ funding stress and can depress interbank rates and medium‑term yields, easing borrowing conditions for households and corporates and indirectly supporting property and infrastructure financing. At the same time, the explicit framing of “keeping liquidity ample” is meant to reassure markets that Beijing prioritises stable financing costs as it navigates weak external demand and uneven domestic consumption.
But durable liquidity also has trade‑offs. Sustained accommodation can encourage credit to extend into higher‑risk sectors or postpone necessary balance‑sheet adjustments, and it reduces the urgency for fiscal or structural reforms to lift demand. Investors should watch whether the PBOC treats this as a one‑off window management tool or the precursor to a series of medium‑term injections, and whether it follows with changes to reserve requirements, medium‑term lending facilities or guidance to banks on targeted lending.
Looking ahead, the key metrics to monitor are interbank rates, the pace and direction of bank lending to households and developers, and the reaction of bond yields and the currency. If the PBOC continues to favour medium‑term buyout operations, global fixed‑income markets and currency desks will see China as leaning further into easing, with spillovers for Asian sovereign yields and commodity markets.