The People's Bank of China will increase overnight reverse repo operations at the end of June, and Huaxi Securities analyzes its impact

The People's Bank of China will increase overnight reverse repo operations at the end of June. Huaxi Securities believes that in the short term, the central overnight interest rate will approach 1.30% -1.40%, leading to a downward trend in market interest rates. In the long run, whether China's policy interest rate system is centered around overnight interest rates depends on its operational structure: if the People's Bank of China increases its operating frequency and scale, short-term market interest rates will be re priced to overnight policy rates, and the framework will shift towards the Federal Reserve style overnight interest rate dominant model; If overnight reverse repurchase is used only sporadically, the existing system centered around 7-day reverse repurchase will continue, and overnight reverse repurchase will only play a role in stabilizing the short-term interest rate center.