On September 23, the People's Bank of China announced via its open market operations notice that, to better align with short-term liquidity needs in the banking system, it will conduct overnight reverse repurchase operations from September 28 to October 8, using fixed-rate, quantity-based tenders with a daily cap of 1 trillion yuan. This marks the second time this month the central bank has announced such operations, following an earlier notice on September 10 for overnight reverse repos from September 14 to 17, which also employed fixed-rate, quantity-based tenders but with a daily cap of 600 billion yuan.

Wind data shows that actual operations from September 14 to 17 reached 504 billion, 597 billion, 600 billion, and 600 billion yuan respectively, totaling 2.301 trillion yuan injected. Ming Ming, chief economist at CITIC Securities, told Securities Daily that the central bank's latest move targets the cross-holiday pressure on interbank liquidity. In the past, the central bank typically used 14-day reverse repos to cover such pressure, but this year, with the overnight reverse repo tool in place, it has opted for this shorter maturity to inject funds through the National Day holiday, setting the daily cap at 1 trillion yuan. This approach not only safeguards the interbank liquidity market amid seasonal cash pressure but also enables more refined liquidity management via the overnight tool.

The increase in the daily cap from 600 billion to 1 trillion yuan reflects higher demand for overnight reverse repos around the extended holiday, driven by factors such as pre-holiday cash withdrawals by residents, month-end bank assessments, and concentrated maturities of open market operations, according to Wang Qing, chief macro analyst at Dongfang Jincheng. He noted that raising the cap allows the central bank to fully satisfy financial institutions' short-term funding needs, guiding DR001, the interbank overnight pledged repo rate for deposit-taking institutions, to fluctuate smoothly around the policy rate and more firmly controlling its volatility.

On the same day, the central bank also announced that on September 24, 2026, it will conduct an 8000-billion-yuan Medium-term Lending Facility operation with a one-year tenor, using fixed-quantity, rate-tender, multi-price bidding methods to maintain ample liquidity in the banking system. Given that September's MLF maturities total 600 billion yuan, the operation results in a net injection of 200 billion yuan. After a temporary net withdrawal in August, MLF returned to net injection in September. Ming Ming views the 200 billion yuan net add as a sign of strengthened support for long-end liquidity. Wang Qing added that the increased MLF rollover helps facilitate smooth government bond issuance, reflecting coordination between monetary and fiscal policy, while continued net injections into medium-term liquidity help keep funding conditions ample and stabilize market expectations.