On April 7th, an 800 billion yuan outright reverse repurchase operation will be conducted, corresponding to a net withdrawal of 300 billion yuan.

China Daily Reporter｜Zhang Shoulin    China Daily Editor｜Liao Dan

On April 3, the PBOC issued an announcement. To maintain ample liquidity in the banking system, on April 7, 2026, the People’s Bank of China will conduct RMB 800 billion in buyout-style reverse repos via a fixed-amount, rate bidding, and multi-price winning approach, with a term of 3 months (89 days). The maturity date will be July 5, 2026 (if it falls on a holiday, it will be extended to the next business day).

On April 8, RMB 1.1 trillion in 3-month buyout-style reverse repos will mature. At that time, the net cash drain corresponding to the buyout-style reverse repos for that term will be RMB 300 billion.

The reporter noted that since entering April, open market operations have continued to be in a net cash drain position, indicating that liquidity in the money market is relatively ample.

Wang Qing, Chief Macro Analyst at Oriental Jincheng, said that the continuous shrinking in volume and rollover of the 3-month buyout-style reverse repos is consistent with the recent continuous “low-volume” operations in the open market. The main reason is that liquidity in the market has been somewhat loose since early April.

Mingming Team of Citic Securities, Chief Economist Mingming, analyzed that, on the one hand, the cross-month funding has ended, and the bank quarterly liquidity assessment has also come to an end, leaving liabilities relatively well-supplied; on the other hand, April is often a “small month” for credit, and the full-year plan for issuing special treasury bonds has not yet been released. As a result, the “asset shortage” pattern in the bond market remains in place.

Continuous two months of shrinking-volume rollover of 3-month buyout-style reverse repos

On April 3, the PBOC announced it will carry out RMB 800 billion in 3-month buyout-style reverse repo operations on April 7. Wang Qing pointed out that data shows RMB 1.1 trillion in 3-month buyout-style reverse repos will mature in April. This means that when the PBOC conducts RMB 800 billion in 3-month buyout-style reverse repo operations on April 7, the 3-month buyout-style reverse repos for the month will roll over at a reduced volume, with a reduced volume of RMB 300 billion. This marks the PBOC’s continuous two-month shrinking-volume rollover of 3-month buyout-style reverse repos, with the reduced volume increasing by RMB 100 billion from the previous month, which is in line with expectations.

April’s money injection and cash drainage

Wang Qing judged that the continuous shrinking-volume rollover of 3-month buyout-style reverse repos is consistent with the recent continuous “low-volume” operations in the open market. The main reason is that liquidity has been loose since the beginning of April. It can be seen that in recent days, the average DR001 has been running below 1.3%. On April 2, the yield on 1-year bank-issued certificates of deposit (AAA-rated) fell below 1.5%, reaching a historical low, and it remains at a clearly low level.

Wang Qing analyzed that the underlying drivers include the PBOC’s large-scale net injection of RMB 1.9 trillion in mid-term liquidity through the comprehensive use of MLF and buyout-style reverse repos from January to February, as well as a relatively low net financing scale of government bonds in March. As a result, the PBOC has appropriately “tightened the water supply” in mid- to short-term liquidity management, releasing a signal to guide liquidity conditions to stabilize and avoid key market interest rates deviating downward excessively from the policy rate. This helps stabilize market expectations.

Mingming Team analyzed that as April begins, liquidity conditions are quite loose. On the one hand, cross-month funding has ended, and bank quarterly liquidity assessments have also wrapped up, leaving liabilities relatively well-supplied; on the other hand, April is often a small month for credit, while the full-year plan for issuing special treasury bonds has not yet been released, so the bond market’s “asset shortage” pattern continues. Or, because funding conditions are already relatively loose, there is not a strong need for the PBOC to further step up liquidity supply.

Going forward, attention should be paid to the issuance of 10-year government bonds in the second quarter

“We believe this does not mean the PBOC will continue to tighten mid- and long-term liquidity. Once major market interest rates rebound to around the level of the policy rate, buyout-style reverse repos are expected to resume net injection.” Wang Qing said that, looking across the full year, the PBOC will comprehensively use long-term liquidity management tools such as the reserve requirement ratio, government bond purchases and sales, MLF, and buyout-style reverse repos to keep liquidity conditions relatively stable and ample. This can ensure the issuance of government bonds while also releasing a signal that quantity-based monetary policy tools will continue to be strengthened.

Wang Qing reminded that it is worth noting that since late February, the evolution of the Middle East situation has driven international oil prices sharply upward, and in March, the overall domestic price level showed a strong upward trend, which has also created some disruption to economic growth momentum. In the short term, amid a sudden rise in external uncertainty, domestic monetary policy, while maintaining ample liquidity, will also tilt somewhat toward stabilizing prices in phases. The timing of any RRR cut may be delayed. If later external shocks further intensify disruptions to domestic economic growth, monetary policy will accordingly increase the degree of moderate easing.

However, it is still necessary to pay attention to the issuance of 10-year government bonds in the second quarter. Mingming Team analyzed that, because each month in the second quarter there are only two issuances of 10-year government bonds, and combined with the increase in supply of ultra-long bonds after the subsequent special treasury bond issuance plan is implemented, whether the current environment of significantly loose funding can be sustained is worth watching.

What should be mentioned is that on March 31, the PBOC website disclosed the contents of the PBOC’s Monetary Policy Committee’s 2026 Q1 regular meeting. Compared with the analysis in the previous quarter regarding domestic and foreign economic and financial conditions, the latest meeting newly includes the phrase “still facing issues and challenges such as strong supply and weak demand, external shocks,” while the corresponding wording in the previous quarter was “still facing issues and challenges such as prominent contradictions of strong supply and weak demand.”

Mingming Team believes that in the next stage, the PBOC may focus more on hedging the domestic spillover impact of overseas geopolitical risks, trade conflicts, and other factors.

Cover image source: 每经 Media Resource Database