(Yicai) June 6 -- China’s central bank injected CNY1 trillion (USD139.2 billion) of three-month funds into the banking system using a newly adopted policy tool, disclosing the amount before the end of the month for the first time so as to enhance transparency during the peak credit season.

The People’s Bank of China added the funds through outright reverse repurchase agreements today “to keep liquidity in the banking system ample,” it revealed in a notice issued late yesterday. The operation adopted a multiple-price bidding method.

Outright reverse repos -- first introduced last October -- are essentially loans provided to banks, but unlike the more common short-term reverse repos, they typically have longer maturities, ranging from weeks to months.

In a surprise move, the PBOC did not wait to disclose the details at month-end, aiming to better manage expectations during a period of elevated credit demand.

By shifting to the start of the month, the PBOC is enabling banks to bid in a timely manner based on their funding needs and make advance liquidity arrangements, Dong Ximiao, chief researcher at Merchants Union Consumer Finance, told Yicai. June is a high season for credit issuance, with banks facing strong demand for funding, he added.

Last month, the PBOC added outright reverse repo agreements totaling CNY700 billion (USD97.5 billion) to offset CNY900 billion of maturing reverse repos. This month, CNY1.2 trillion worth of outright reverse repos are scheduled to expire.

Disclosing the bidding process in advance not only enhances monetary policy transparency but also helps guide market expectations, making the outlook for future liquidity more predictable, said Zhang Xu, chief fixed income analyst at Everbright Securities. 

Zhang added that the headline figure of CNY1 trillion may not represent the full amount for the month, as the central bank could conduct additional operations using the same tool if needed.

In addition to the bidding disclosure, the PBOC also inaugurated a new policy communication column summarizing the previous month’s key monetary policy developments, further reinforcing transparency.

According to the new column, the PBOC injected CNY1 trillion of liquidity in May by cutting the reserve requirement ratio. It also made a net injection of CNY375 billion through the medium-term lending facility, while pledged supplementary lending and outright reverse repo operations resulted in net withdrawals of CNY270 billion and CNY200 billion, respectively.

Editors: Dou Shicong, Emmi Laine