China uses reverse repos, MLF to maintain reasonable, ample liquidity

The central bank generated 89 billion yuan ($12.52 billion) through reverse repos in seven days at an interest rate of 1.8 per cent. Through a reverse repo, a central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.

MLF injected into the market 995 billion yuan, which will mature in a year at an interest rate of 2.5 per cent, a state-controlled media outlet reported. MLF was initiated in 2014 to help commercial and policy banks maintain liquidity by allowing them to borrow from the central bank using securities as collateral.

Fresh funds worth 216 billion yuan have been injected recently into the banking system as 779 billion yuan worth of MLF loans are set to expire this month.

ALCHEMPro News Desk (DS)