2015/7/8 Monthly Inflation PBoCs (2008~2014) Open Market Operations PBoC's RMB OMO started from 1998 banks)have been chosen to be the primary dealers hat can trade large volume of treasury bonds with OMO instrument ket trading Issuance of central bank bills PBoC's OMO Instruments Example of PBoCc's Reverse Repo po (and Reverse repo) (June 29, 2015)China PBoC injects Again Via Reverse Repo Despite RRR Cut another CNY50 billion via 7-day reverse repos into Secondary market trading the interbank m PBoc buys or sells bonds in the secondary market to release or get back liquidity operations on tuesday. Issuance of central bank bills The injection came as a surprise as the PBoc has PBoC issues bills to get back liquidity and releases already cut the deposit reserve ratio to selected liquidity when bills are due eady moved lower. Example of PBoC's Reverse Repo Example of PBoc Cutting RRR and Interest Rate The injection came as a surprise as the pboc has (une 28, 2015)China cuts reserve ratio, interest already cut the deposit reserve ratio to selected rates to bolster growth banks over the weekend and money rates have China s central bank cut both the requirement reserve ratio(RRR), the amount of reserves banks The seven day repo opened at 2. 58% on tuesday required to hold and benchmark interest rates on compared with Monday s average of 2. 6935% and Saturday. The credit-easing move to be effective on Sunday Traders believe the injection is partly to give stock ims to"support the real economy and promote investors more confidence and to reaffirm the restructuring, said the People's Bank of China PBoC s easing stance remains unchanged (PBOC) in an announcement.2015/7/8 7 Monthly Inflation (2008~2014) 37 PBoC’s Open Market Operations • PBoC’s RMB OMO started from 1998. • In 2012, 50 financial institutions (mainly commercial banks) have been chosen to be the primary dealers that can trade large volume of treasury bonds with PBoC. • OMO instruments – Repo – Reverse repo – Secondary market trading – Issuance of central bank bills 1-38 PBoC’s OMO Instruments • Repo (and Reverse repo) – PBoC sells bonds (and takes back liquidity) and buys them back (and releases liquidity) in the future (28 days or more) • Secondary market trading – PBoC buys or sells bonds in the secondary market to release or get back liquidity • Issuance of central bank bills – PBoC issues bills to get back liquidity and releases liquidity when bills are due. 1-39 Example of PBoC’s Reverse Repo • (June 29, 2015) China PBOC Injects Again Via Reverse Repo Despite RRR Cut – The People's Bank of China unexpectedly injected another CNY50 billion via 7-day reverse repos into the interbank market via its open market operations on Tuesday. – The injection came as a surprise as the PBoC has already cut the deposit reserve ratio to selected banks over the weekend and money rates have already moved lower. 1-40 Example of PBoC’s Reverse Repo – The injection came as a surprise as the PBoC has already cut the deposit reserve ratio to selected banks over the weekend and money rates have already moved lower. – The seven day repo opened at 2.58% on Tuesday, compared with Monday's average of 2.6935% and last Friday's 2.9292%. – Traders believe the injection is partly to give stock investors more confidence and to reaffirm the PBoC's easing stance remains unchanged. 1-41 Example of PBoC’ Cutting RRR and Interest Rate • (June 28, 2015) China cuts reserve ratio, interest rates to bolster growth – China's central bank cut both the requirement reserve ratio (RRR), the amount of reserves banks required to hold, and benchmark interest rates on Saturday. – The credit-easing move, to be effective on Sunday, aims to "support the real economy and promote restructuring," said the People's Bank of China (PBOC) in an announcement. 1-42