China signals overnight rate set to become main policy benchmark

Published Mon, Oct 19, 2026 · 07:00 PM

CHINA’S central bank signalled its overnight reverse repurchase rate will replace the current seven-day rate as the new policy benchmark, in another step that aligns it closer with global peers.

The People’s Bank of China will study the possibility of switching the main tenor of its open market operations to the overnight one at an appropriate time, and the overnight reverse repo rate will then become the main policy rate, Pan Gongsheng, governor of the PBOC, said at the Financial Street Forum in Beijing on Monday, according to local media outlet Cailian.

Overnight repos are the most heavily traded product in the interbank money market and their rate, known as DR001, has already become the target of the PBOC’s operations, Cailian cited Pan as saying. Aligning the tenor of central bank operations with the target would make the PBOC’s guidance more precise, he was cited as saying.

The overnight repo rate was steady at 1.26 per cent following the news. The yuan rose 0.1 per cent to 6.6813 per dollar in the offshore market, holding on to an earlier gain.

Yields on the government’s 10-year and 30-year bonds were little changed at 1.64 per cent and 2.06 per cent, respectively.

The PBOC first introduced an overnight tenor to its open market operations in June in a key move to expand its short-term liquidity toolkit.

The decision has fuelled speculation that the overnight rate will play a greater role and eventually become the main policy benchmark to anchor market borrowing costs. 

Such an approach would make the PBOC operate more like other major central banks, which tend to treat overnight market rates as the main target of policy operations. 

The costs of overnight borrowing among banks have dropped below 1.3 per cent in October to their lowest level since May, widening their gap against the seven-day reverse repo rate — which the PBOC has at 1.4 per cent.

In June, the PBOC set the rate on the new overnight reverse repo tool at 1.25 per cent, Bloomberg News reported previously.

The recent declines in market rates reflect expectations of a transition in China’s monetary policy anchor, according to analysts.

The central bank has conducted overnight reverse repurchase operations every month from June to September, and their frequency as well as volume offered have been on the rise. The operations have helped address market demand for funds during month-end payments or tax payment times. BLOOMBERG