China's central bank announced on Monday it had activated its open market outright reverse repo operations facility and would use it to trade with primary dealers in open market operations on a monthly basis.
The bank took the decision to maintain a "reasonable abundance of liquidity in the banking system and further enrich the central bank's monetary policy toolbox," it said in a statement.
State-owned Shanghai Securities News said in an article published shortly after the People's Bank of China's (PBOC)notice that the facility was expected to cover three- and six-month tenors and that it would aid liquidity adjustments over the next year, citing people close to the central bank.
The PBOC's announcement said its new tool would have a tenor of less than one year.
"The central bank's choice to launch this new tool at this time is also expected to be a better hedge against the concentrated expiry of medium-term lending facility before the end of the year," the article said.
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