Market interest rates hit new lows for the year, loose funds drive flexible reduction in buyback operations.

On April 3rd, the central bank announced that it would conduct 800 billion yuan of 3-month reverse repurchase operations. As the amount due that month reached 1.1 trillion yuan, this operation resulted in a net withdrawal of 300 billion yuan. This reduction in liquidity operations is in line with market expectations, reflecting the continuing loose liquidity in the banking system and a noticeable decline in financial institutions' demand for funds from the central bank. In recent times, liquidity has remained loose and market rates have stayed near the low of 1.2%. After the Spring Festival, residents' cash flows back into banks, coupled with concentrated end-of-quarter fiscal expenditures, have led to generally ample funds for financial institutions since April, resulting in further decline in market rates. Data shows that on April 3rd, the overnight interbank rate DR001 dropped to around 1.23%, hitting a new low for the year; the 1-year interbank certificate of deposit issued by state-owned banks fell below 1.50%, reaching a historic low. Market experts indicate that, under these circumstances, the decline in financial institutions' demand for central bank liquidity and the reduction of tools in operation were expected. The 3-month reverse repurchase operations are mainly aimed at seasonal factors. Looking at the first quarter of previous years, there have been significant impacts from cash injections and withdrawals around the Spring Festival. Demand for 3-month reverse repurchase operations is high in January and February before the holiday, followed by a decrease in demand after April, which is also a historical pattern.