The PBOC will add an overnight reverse repo operation at end-June. Huaxi
Securities says this should push the overnight rate center toward about
1.30%-1.40% in the short term, guiding market money rates lower. Longer term,
whether China’s policy-rate system becomes overnight-rate–centric depends on the
operation’s structure: if the PBOC increases frequency and size, short-end
market rates could reprice to the overnight policy rate and the framework could
shift toward a Fed-style, overnight-rate–led regime; if overnight repos are used
only episodically, the existing 7-day reverse repo–centered system would likely
persist and overnight repos would merely stabilize the short-end rate center.
