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

The Beijing News reporter｜Zhang Shoulin    The Beijing News editor｜Liao Dan

On April 3, the PBOC announced that to maintain ample liquidity in the banking system, on April 7, 2026, the People’s Bank of China will carry out an 800 billion yuan buyout-style reverse repo operation via fixed-amount tenders with interest-rate bidding and multi-price bid settlement, with a term of 3 months (89 days). The maturity date will be July 5, 2026 (extended to the next business day if it falls on a holiday).

On April 8, 11,000 billion yuan of 3-month buyout-style reverse repos will mature; at that time, the net cash drainage corresponding to that term of buyout-style reverse repos will be 3,000 billion yuan.

Reporters noted that since entering April, open market operations have continued to be in a net cash drainage position, indicating that liquidity in the money market is relatively abundant.

Wang Qing, Chief Macro Analyst at Orient Goldcheng, said that the continuous volume-reduction and rollover of 3-month buyout-style reverse repos, consistent with the recent “very low bidding volume” operations in open market activities, is mainly due to looser liquidity in the market since early April.

Mingming Team, Chief Economist at Citic Securities, analyzed that, on the one hand, the end of cross-month funding, together with the conclusion of banks’ quarterly liquidity performance assessments, means liabilities are relatively well supplied; on the other hand, April is often a “small credit month,” and the full-year special treasury bond issuance plan has not yet been released, so the current “scarcity of assets” situation in the bond market continues.

Continuous two-month volume-reduction and rollover of 3-month buyout-style reverse repos

On April 3, the PBOC announced that it would conduct an 800 billion yuan 3-month buyout-style reverse repo operation on April 7. Wang Qing pointed out that the data show that 300B yuan of 3-month buyout-style reverse repos will mature in April. As a result, when the PBOC conducts an 800 billion yuan 3-month buyout-style reverse repo on April 7, it means that the 3-month buyout-style reverse repos for that month will be rolled over with a reduced volume; the reduced volume will be 300B yuan. This is the PBOC’s continuous two-month volume-reduction and rollover of 3-month buyout-style reverse repos; the reduced volume is 1000 billion yuan larger than the previous month, which is in line with expectations.

April’s monetary injection and cash drainage

Wang Qing judged that the continuous volume-reduction and rollover of 3-month buyout-style reverse repos, consistent with the recent continuous “very low volume” operations in the open market, is mainly due to looser liquidity in the market since early April. It can be seen that in recent days, the DR001 average has been operating below 1.3%, on April 2, the yield on 1-year interbank certificates of deposit issued by commercial banks (AAA rated) fell below 1.5%, reaching a historic low; all of these are clearly at relatively low levels.

Wang Qing analyzed that the underlying drivers are mainly the PBOC’s large-scale net injection of 1.9 trillion yuan of medium-term liquidity through the comprehensive use of MLF and buyout-style reverse repos from January to February, as well as the relatively lower net financing scale of government bonds in March. As a result, during mid- to short-term liquidity management, the PBOC has appropriately “tightened the net” to release a signal that it will guide funding conditions to remain stable and avoid major market interest rates from deviating downward too much from policy rates, which helps stabilize market expectations.

Mingming Team analyzed that entering April, funding conditions are quite loose. On the one hand, cross-month funding ends, and the banks’ quarterly liquidity performance assessment period comes to an end as well, so liabilities are relatively well supplied; on the other hand, April is often a small month for credit issuance, while the full-year special treasury bond issuance plan has not yet been announced, so the bond market’s “scarcity of assets” pattern continues. It may also be because funding is already relatively loose, so there is not a strong need for the PBOC to further step up liquidity supply.

For the next stage, it is necessary to monitor the issuance of 10-year government bonds in the second quarter

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

Wang Qing reminded that it is worth noting that since the end of February, developments in the Middle East situation have driven international oil prices to surge sharply upward. In March, the overall domestic price level showed a strong upward trend, which also creates some disruption to the growth momentum of the economy. In the short term, amid a sudden rise in external uncertainties, while maintaining ample liquidity in the market, domestic monetary policy will also tilt somewhat toward stabilizing prices in phases. The timing of any reserve requirement cut could be delayed; later, if external shocks increasingly disrupt domestic economic growth, monetary policy will correspondingly increase appropriate easing efforts.

However, it still remains necessary to watch the issuance of 10-year government bonds in the second quarter. Mingming Team analyzed that because each month in the second quarter has only two issues of 10-year government bonds, and considering the subsequent increase in super-long bond supply after the special treasury bond issuance plan is implemented, whether the current environment of significantly ample funding can be sustained is worth monitoring.

It should be noted that on March 31, the PBOC website disclosed the contents of the PBOC Monetary Policy Committee’s 2026 first-quarter regular meeting. Compared with the previous quarter’s analysis of China’s domestic and overseas economic and financial conditions, the latest meeting newly added that it “still faces problems and challenges such as strong supply and weak demand, as well as external shocks.” The corresponding wording in the previous quarter was “still faces problems and challenges such as prominent contradictions of strong supply and weak demand.”

Mingming Team believes that in the next stage, the PBOC may pay even more attention to the input-side impacts on the domestic economy from factors such as overseas geopolitical risks and trade conflicts.

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