MNI CHINA MONEY MARKET INDEX: More Liquidity For CNY Holiday

Chinese interbank money market traders expect comfortable liquidity conditions next month as the central bank increases its reverse repo operations ahead of the Chinese New Year holiday while holding the policy rate steady, MNI’s China Money Market Index indicated on Wednesday.

The China liquidity outlook sub-index fell to 39.2 from last month’s 47.0, the lowest in 11 months (the lower it reads, the looser liquidity), with 74.5% of traders expecting the same comfortable conditions next month, while 23.5% see further loosening, the highest since February 2025. The overall sub-index for the PBOC’s Open Market Operations outlook rose to 34.3 from 47.0, with 45.1% of participants seeing “net injections" next month, also the highest since last February. 

The People’s Bank of China is likely to ramp up OMOs before the Spring Festival to offset additional cash demand over the holidays, said a trader in Shandong.

MNI’s special question showed 35.3% of traders expected additional PBOC liquidity injections before the holiday. A Shanxi trader expected the central bank to restart its 14-day reverse repos while retaining net injections via seven-day repos, and a trader in Hebei said the Bank would provide extra liquidity in the final working days before the holiday and to start to withdraw it as the operations mature after the festival. The nine-day long CNY holiday starts Feb 15. 

As an important liquidity management tool, outright reverse repo operations will remain active. The sub-index for the outlook of outright reverse repo operations in the coming month was 23.5 from 23, with 52.9% of traders expecting an increase from the PBOC. 

Expectations for any short-term policy rate cut remain low. The PBOC’s seven-day reverse repo rate outlook sub-index rose to 57.8 from 55.0, with 84.3% of participants expecting a steady rate in the coming month. Some 82.4% thought the seven-day repo rate for deposit-taking institutions (DR007) would remain steady, with the sub-index staying at 51.0. DR007 is benchmarked by the PBOC’s key seven-day reverse repo rate. (See MNI PBOC WATCH: Easing On Hold As Marginal Recovery Signs Show)

Without further policy easing, the bond market is unlikely to see big moves. Another special question showed traders believed the 10-year treasury yield would edge down from the current 1.83% this year, with 60.8% of participants seeing “below 1.80%”.

The 10-year bond yield is expected to stay within a range from 1.7% to 1.9% thanks to ample liquidity, with the DR007 staying consistently below the policy rate, said a trader in Fujian. The yield would fluctuate by about 30 to 40 basis points for the whole year and the probability of a one-way trend is low, said a trader in Shanghai.

The PBOC may reduce its policy rate by 10 basis points later this year, which would push the yield down a bit, a Shanghai trader predicted. (See MNI INTERVIEW: Big PBOC Easing Unlikely Despite Price Focus)

The next-six-month policy outlook sub-index showed fewer expectations of further easing, with 47.1% of traders seeing additional easing, the lowest in a year, taking the index to 26.5 from 24.0, the highest in a year. However, participants believed the central bank will remain accommodative, as the sub-index of current policy bias fell to 27.5 from 30.0 last month.

The sub-index covering current liquidity conditions edged down to 22.5 from 23.0 last month, with 54.9% of participants seeing looser liquidity than last month. The sub-index covering the PBOC’s current OMOs showed all participants assessed OMOs as being “in line with demand”. 

The PBOC provided a combination of medium-term lending facilities, outright reverse repos and seven-day reverse repos this month, resulting in a net injection of CNY1 trillion, which offset liquidity pressure from tax payments, loan supply, new year cash withdrawals, and government bond issuance, said the Fujian trader.

The MNI China Money Market Index (MMI) survey was conducted from Jan 12 to Jan 23, with participation of 51 traders from both state-owned and joint-venture banks. 

The official MNI China Money Market Index press release is available here:
MNI China Liquidity Index Jan Presser 2026.pdf