PBOC to Conduct Overnight Reverse Repos Capped at 600 Billion Yuan Daily

The People's Bank of China (PBOC) announced on August 12, 2026, that it will conduct overnight reverse repo operations on August 14 and from August 17 to August 19. The central bank will use fixed-rate, quantity-bidding procedures, with daily volume capped at 600 billion yuan. The decision follows two consecutive days of zero volume in 7-day reverse repos and aims to refine short-term liquidity management as interbank funding rates remain soft and government bond issuances pick up speed.

The planned overnight reverse repo operations highlight the central bank's shift toward precise, ultra-short-term liquidity management. By deploying overnight tools rather than longer 7-day operations during mid-month transitions, the central bank reduces unnecessary liquidity accumulation while preventing temporary volatility in money market rates.

The People's Bank of China (PBOC) announced on August 12, 2026, that it will hold overnight reverse repo operations on August 14 and from August 17 to August 19, offering up to 600 billion yuan per day to commercial banks, according to official statements published by state media, including Xinhua and Securities Times. The central bank specified that the operations will use fixed-rate, quantity-bidding methods to better match short-term liquidity demand in the banking system. The pre-announced schedule follows two consecutive days—August 11 and August 12—in which 7-day reverse repo operation volumes dropped to zero due to subdued demand from primary dealers, Securities Times reported. Short-term interbank money rates have remained loose in early August. The DR001 overnight repo rate has consistently stayed below the PBOC's 1.4% policy benchmark rate since August 3, indicating comfortable liquidity across commercial banks at the start of the month. Central bank officials noted that overnight reverse repos serve as an ultra-short-term fine-tuning tool designed to smooth sharp liquidity fluctuations. The central bank added overnight reverse repos to its open market operations toolkit in late June 2026 to enrich its tenor structure and enhance interest rate transmission mechanisms, according to Xinhua. PBOC Deputy Governor Zou Lan recently emphasized at a press conference that the central bank prioritizes the regulatory capacity for ultra-short liquidity over interest rate shifts when conducting overnight operations. Zou explained that complex drivers—including fiscal expenditure patterns, reserve requirement deposits, and cash flows—influence bank liquidity, requiring central bank flexibility across operational tools. Market analysts expect money market liquidity demands to rise later in August. Oriental Golden Sun chief macro analyst Wang Qing noted that accelerating government bond issuances and upcoming medium- and long-term funding maturities could widen the liquidity gap compared to July. Analysts anticipate the central bank will resume regular 7-day reverse repos alongside overnight operations as month-end liquidity pressures emerge, ensuring benchmark rates like DR001 remain anchored near policy targets.