China’s Central Bank Takes More Control Over Rates by Adding Temporary Repos
- Bank will conduct additional open market operations as needed
- PBOC also trying to manage longer-term rates via bond trading
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The People’s Bank of China tightened its grip on interest rates, introducing a new mechanism to influence short-term borrowing costs as policymakers expand their toolkit to guide markets.
The central bank’s move to conduct new bond repurchase or reverse repo operations effectively narrows the corridor within which short-term rates can fluctuate. That will strengthen market expectations for the seven-day repurchase rate to become the new benchmark.