On July 29 DR007 closed at 1.5019%, the highest since June 25; it dipped to
1.4652% at the session open. The PBOC executed net liquidity injections of 870.5
bln yuan today. DR007 is widely used as China’s short-end rate anchor and
reflects short-term funding tightness; the spread between DR007 and the PBOC
7-day reverse repo rate signals market liquidity pressure—a large premium
suggests tightness and may prompt central bank injections, while a narrow or
negative spread indicates ample funding and lower short-term funding costs for
leveraged trades in equities and bonds.
