The People’s Bank of China (PBOC), China’s central bank, is responsible for setting the daily midpoint of the yuan (also known as renminbi or RMB). The PBOC follows a managed floating exchange rate system that allows the value of the yuan to fluctuate within a certain range, called a “band,” around a central reference rate, or “midpoint.” It’s currently at +/- 2%.
Earlier:
The daily fixing of this mid-rate is often interpreted as a policy signal rather than just a technical reference point. A higher-than-expected USD/CNY midpoint is typically read as a sign the PBOC is leaning against CNY appreciation pressure, like today.
PBOC injected 88.3bn yuan via 7-day reverse repos at an unchanged rate of 1.40%.
- and, the PBOC injected 100bn yuan via 14-day reverse repos at an unchanged rate of 1.40%.
The People’s Bank of China had earlier consulted traders on demand for 14-day reverse repos. There are several practical and signalling reasons why the PBoC would consult traders about demand for 14-day reverse repos rather than relying solely on its standard 7-day operations.
1. Managing liquidity across calendar stress points
The PBoC often adjusts the tenor of its open-market operations when it anticipates temporary liquidity pressures linked to tax payments, bond issuance, regulatory assessments, or holidays. A 14-day repo allows the central bank to bridge a known funding gap without having to roll liquidity every week, reducing operational friction and funding uncertainty for banks.
2. Smoothing volatility without changing the policy stance
Extending the maturity of liquidity injections is a technical adjustment, not a policy shift. By offering 14-day funds, the PBoC can stabilise money-market rates and prevent short-term funding stress without cutting policy rates or changing the 7-day repo rate, which remains its primary policy signal.
3. Targeting duration rather than size
Sometimes the issue isn’t how much liquidity the system has, but how long it stays there. If banks are reluctant to lend beyond very short tenors, overnight and 7-day rates can become jumpy. A 14-day operation lengthens the effective liquidity duration, anchoring expectations for funding conditions over a longer window.
4. Testing market appetite and balance-sheet demand
Consulting traders before shifting tenor helps the PBoC gauge true demand, ensuring liquidity is absorbed efficiently rather than sitting idle. It also avoids crowding out interbank activity or sending unintended easing signals.
5. Signalling caution rather than stimulus
The choice of 14-day repos can be read as preventive maintenance, not stimulus. It suggests the PBoC wants to stay ahead of potential stress while avoiding broader easing at a time when it remains sensitive to currency stability, capital flows, and financial-stability risks.
Bottom line
By consulting on 14-day reverse repos, the PBoC is likely aiming to smooth liquidity over a longer horizon, reduce short-term funding volatility, and pre-empt stress — all without altering its core policy stance. It’s a classic example of China’s preference for fine-tuning liquidity tools rather than headline policy moves.
This article was written by Eamonn Sheridan at investinglive.com.