PBoC No Reverse Repos For One Month, Waiting for G20

Reuters: China c.bank may have revived repos to drain liquidity in Oct - CSJ
China’s central bank may have drained short-term funds from the banking system in late October by quietly reviving a tool to mop up excess liquidity, a state-run newspaper reported on Monday, citing analysts.

But the China Securities Journal said the possible re-launching of repo operations for the first time in years did not signal a shift in the central bank’s monetary policy stance.

Beijing has loosened monetary and fiscal policy conditions this year as it seeks to cushion the cooling economy and encourage more lending to private enterprises, with further growth boosting measures expected in coming months.

The People’s Bank of China has almost exclusively relied on reverse repurchase agreements, or reverse repos, to pump liquidity into the banking system in recent years.
Chinanews: 央行逆回购连停创纪录 市场猜测货币政策是否转向
Whether monetary policy turns

  What is the central bank's reverse repurchase? The People's Bank of China purchases securities from primary dealers and stipulates that the sale of securities to primary dealers on a specific date in the future will be aimed at releasing liquidity to the market.

  Ping An Securities believes that the suspension of the reverse repurchase by the central bank does not mean that monetary policy is tightening. The central bank's move may be based on the following considerations: First, the current liquidity of the banking system is still at a reasonable level. Second, market interest rates remain low and run smoothly. Third, marginal mitigation of the pressure of RMB depreciation brought about by the US-China spread.

  In this regard, Hongye Futures also said that regardless of whether the central bank has conducted a repurchase operation and the current suspension of reverse repurchase operations, it cannot mean that monetary policy will be tightened. Although the liquidity will converge under the pressure of the tax period or the impact of the end of the month, the overall situation remains reasonable. Usually, at the end of the year, there will be a large-scale fiscal deposit, and with the fiscal expenditure in place, the liquidity problem will be alleviated.

  Looking forward to the future, Ping An Securities said that the tone of China's monetary policy is still neutral and loose, and it will neither turn to tightening nor be fully lenient. First, the current downward trend in economic growth is obvious, and steady growth has become the primary task of monetary policy, which determines that monetary policy will not turn to tighten in the future. The third quarter monetary policy implementation report also proposed to maintain a reasonable and sufficient liquidity, and help stabilize growth through the formation of a “triangular support framework”. Second, the future liquidity is still reasonably abundant, and the liquidity operation continues the management idea of ​​“locking short and prolonging”. The RRR reduction and 1-year MLF operation are more worthy of expectation.
After the Shanghai G20 meeting in 2016, China cut the RRR.

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