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according to the website of the people's bank of china on september 18, in order to hedge the impact of factors such as the maturity of the medium-term lending facility (mlf) and open market reverse repurchase, and maintain a reasonable level of liquidity in the banking system,the people's bank of china conducted a reverse repurchase operation of 568.2 billion yuan using a fixed-rate, quantity bidding method, with a winning rate of 1.7%, the same as before.

today, 487.5 billion yuan of 7-day reverse repo and 591 billion yuan of mlf matured. the central bank said that the mlf that matured today will be renewed on september 25.

image source: people's bank of china

moderately increase efforts

"on september 18 and this week (september 18-september 20), a large amount of open market instruments will mature. in order to cope with the disturbances to the short-term funding side such as the accelerated issuance of government bonds, the central bank will moderately increase the intensity of open market operations to meet the short-term funding needs of institutions, which will help maintain a reasonable level of market liquidity and stabilize expectations." zhou maohua, a macro researcher in the financial markets department of china everbright bank, said.

although the central bank has increased reverse repurchase, the funding situation still needs to stabilize. huaxi securities analyst xiao jinchuan said that the funding situation will face challenges again after the mid-autumn festival. the tax declaration date in september has been postponed to the 18th, and the 19th-20th is the payment period. some cross-tax period funds and cross-season fund demands overlap, which may aggravate the tightness of the funding situation. in addition, 591 billion yuan of mlf will expire on september 18, but since the renewal time is delayed to the 25th, the vacuum period of renewal may bring about a short-term funding gap. referring to mid-august, the funding situation may fluctuate more.

huafu securities analyst xu liang also said that due to the delay in the renewal of mlf, the temporary use of omo to replace the maturing mlf in august may lead to a short-term funding gap and increase the volatility of the funding side. it is expected that the funding price will fluctuate 10-20 basis points above the policy interest rate.

however, pang ming, chief economist of jll greater china, believes that increasing the volume of reverse repurchase operations will help smooth out the fluctuations in the money market that may be caused by the subsequent mlf extension, strengthen expectation guidance to ease possible liquidity demand pressure, and effectively control the fluctuation range of money interest rates.

funding is expected to remain stable

industry experts said that in the future, at special times such as the end of the month and the end of the quarter, as usual, the central bank may moderately increase its open market operations to protect liquidity.

zhou maohua said that considering the approaching of the special time points of the end of the month and the end of the quarter, the increase in the supply of government bonds, and the disturbance of the short-term funding surface caused by the payment of reserve requirements and taxes, the market has expectations for the strengthening of macroeconomic policies, and the central bank may still introduce policies such as reducing the reserve requirement ratio to cooperate with the active fiscal policy. at the same time, with the flexible operation of reverse repurchase and other tools by the central bank, it is expected that the funding surface will continue to remain stable.

"over a longer period of time, it is expected that the central bank will continue to carry out timely and effective liquidity adjustments through open market operations and other monetary policy tools, and conduct scientific, standardized and refined liquidity management to ensure that the total amount is moderate, the rhythm is steady and the structure is appropriate, so as to smooth out short-term disturbances, maintain a reasonable level of market liquidity, and maintain stable market expectations and smooth operations." pang ming said.