China’s Central Bank to Add Temporary Repos Depending on Market Conditions
The People’s Bank of China will carry out temporary bond repurchase or reverse repurchase operations depending on the market situation during working days between 4:00 p.m. and 4:20 p.m.
The People’s Bank of China will carry out temporary bond repurchase or reverse repurchase operations depending on the market situation during working days between 4:00 p.m. and 4:20 p.m.
The central bank aims to maintain reasonable and sufficient liquidity in the banking system, it said in a statement on Monday. It gave details on pricing and said the duration of the operations would be overnight with fixed rates.
Ever since an old speech by President Xi Jinping mentioning PBOC bond trading as a potential tool came to the market’s attention two months ago, investors had been debating how that’s likely to work in practice.
Trading bonds is just one shift in how China’s central bank plans to operate in the midst of a decades-long reform of how it conducts monetary policy. Under proposals laid out by Governor Pan Gongsheng in a June speech, the PBOC is considering a switch to using just one key short-term policy rate.
A rally in Chinese bonds has pushed benchmark yields toward their lowest in more than two decades amid a wave of inflows into scarce fixed-income securities and pessimism over the country’s long-term growth potential. That has led to a series of warnings from the PBOC on the risks of a bond bubble, particularly in longer-dated debt.
The move comes after the PBOC on Friday took the next step toward selling government bonds to cool a record-breaking rally, saying it now has “hundreds of billions” of yuan of the securities at its disposal through agreements with lenders.
This article was generated from an automated news agency feed without modifications to text.
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