China’s central bank continued to inject liquidity into the banking system on Tuesday, with 12 billion yuan (1.96 billion U.S. dollars) of 7-day reverse repurchase agreement (repo) operations.
The yield of the reverse repo, a process of central bank purchasing securities from commercial banks with an agreement to resell them at a future date, stood at 4.0 percent, according to a People’s Bank of China statement.
“The reverse repo rate fell 40 basis points from last week’s offering,” said Jiang Chao, an analyst with Haitong Securities.
“It indicated that the central bank aims to guide the market borrowing costs to a lower level,” he said.
Changes in the yields of reverse repo rate usually reflect how the central bank views the current borrowing costs in the market and how it will guide future lending rates.
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