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on september 23, in order to maintain a reasonable level of liquidity in the banking system at the end of the quarter, the people's bank of china (hereinafter referred to as the "pboc") conducted 7-day reverse repurchase operations of 160.1 billion yuan and 14-day reverse repurchase operations of 74.5 billion yuan in a fixed interest rate and quantity bidding method. the open market 7-day reverse repurchase operation interest rate announced on the same day was 1.7%, the same as the previous period. the open market 14-day reverse repurchase operation interest rate was 1.85%, down 10 basis points from 1.95% in the previous period.

the central bank made it clear in the announcement that the interest rate for 14-day reverse repurchase operations in the open market is the interest rate for 7-day reverse repurchase operations in the open market plus 15 basis points.

the central bank's restart of the 14-day reverse repurchase and reduction of 10 basis points not only provides cross-season funds for the banking system and meets the market's reasonable liquidity needs, but also clarifies the pricing of the open market 14-day reverse repurchase operation rate, and once again makes it clear that the open market 7-day reverse repurchase operation rate is the main policy rate.

restarting 14-day reverse repo to meet liquidity needs

in the past week, the upward pressure on money market interest rates emerged due to the disturbance of fiscal payment and cross-festival factors. the weighted average interest rate of interbank 7-day pledged repurchase (dr007) has been above 1.8% since september 18, significantly higher than the current 1.7% open market 7-day reverse repurchase operation rate (hereinafter referred to as "7-day reverse repurchase rate").

as of september 20, dr007 was 1.9569%, still above the 7-day reverse repurchase rate. as the national day holiday approaches, the month-end cash demand and the increase in institutional demand across the holidays may cause disturbances to the capital market. market institutions generally believe that the capital market will not be loose in the future and the volatility may increase further.

the chief macro analyst of orient securities pointed out to the securities times and china securities journal that market interest rates have risen sharply since september. the yield on the 1-year interbank deposit certificate of commercial banks (aaa grade) has risen to near the mlf operating rate, and dr007 has continued to run above the short-term policy rate (the central bank's 7-day reverse repurchase rate). "this means that the liquidity of the banking system is tightening."

recently, the heads of relevant departments of the central bank made it clear that the monetary policy will adhere to a supportive monetary policy stance. lu lei, deputy governor of the central bank, also stated at a press conference of the state council information office that the central bank will use a variety of monetary policy tools in a comprehensive manner to maintain a reasonable level of liquidity.

regarding the central bank's restart of the 14-day reverse repurchase operation, experts pointed out that it is mainly to provide a large amount of cross-season funds to the banking system to fully meet the market's reasonable liquidity needs.

clarify the pricing of 14-day reverse repo rate

after the 7-day reverse repurchase rate in the open market was lowered by 10 basis points in july, the 14-day reverse repurchase rate was also lowered by 10 basis points to 1.85%.

previously, considering that the 7-day reverse repurchase operation rate in the open market has basically assumed the function of the main policy interest rate, in order to enhance the authority of the policy interest rate and effectively stabilize market expectations, the central bank optimized the bidding method to fixed-rate and quantity bidding, explicitly indicated the operating interest rate, and improved the market-oriented interest rate regulation mechanism.

in this announcement, the central bank further clarified that the open market 14-day reverse repurchase operation rate is the open market 7-day reverse repurchase operation rate plus 15 basis points, and once again made it clear that the open market 7-day reverse repurchase operation rate is the main policy rate.

in an interview with reporters, pang ming, chief economist and head of research at jll greater china, said that the decline in the 14-day reverse repurchase rate will help continue the trend of "price sustainability" in financial support for the real economy and continue to promote a steady decline in the credit and financing costs of the real economy.