On December 31, 2024, the People's Bank of China (hereinafter referred to as the "Central Bank") announced that in order to maintain sufficient liquidity in the banking system, in December 2024, the People's Bank of China (hereinafter referred to as the "PBOC") carried out a 1400 billion yuan buyout reverse repurchase operation by means of fixed quantity, interest rate bidding and multi price winning. Among them, the 3-month (91 day) term is 700 billion yuan, and the 6-month (182 day) term is 700 billion yuan. This is also the largest month of operation for buyout reverse repurchase since its launch in October last year. In October last year, the central bank launched a six-month (182 day) buyout reverse repurchase of 500 billion yuan, and in November last year, it launched a three-month (91 day) buyout reverse repurchase of 800 billion yuan. On the same day, the People's Bank of China also announced that in order to strengthen the counter cyclical adjustment of monetary policy and maintain sufficient liquidity in the banking system, the open market treasury bond bond trading operation was carried out in December 2024, with a monthly net bond purchase face value of 300 billion yuan. The net purchase scale was also the largest since the launch of treasury bond trading operations last August. The net purchase of treasury bond in August last year was 100 billion yuan, and the monthly net purchase from September to November last year was 200 billion yuan. The Chief Economist of CITIC Securities, Mingming, told reporters that there will be a surge in local bond supply in December 2024, and there will be seasonal tightening pressure on funds as the New Year approaches. In December last year, MLF (medium-term lending facility) realized a net withdrawal of liquidity of 1150 billion yuan, while this time the central bank implemented a net release of 1400 billion yuan of outright reverse repo and a net purchase of 300 billion yuan of treasury bond. Overall, a net supply of medium to long-term liquidity of 550 billion yuan was achieved in December last year. "In December 2024, the central bank launched a 1400 billion yuan buyout reverse repurchase, combined with a net purchase of 300 billion yuan of treasury bond, and continued to operate 300 billion yuan of MLF that month, which injected a total of 2 trillion yuan of medium - and long-term liquidity into the banking system, far exceeding the maturity of 1450 billion yuan of MLF in December." Wang Qing, Chief Macro Analyst of Dongfang Jincheng, stated that this is equivalent to a net investment of 550 billion yuan in medium and long-term liquidity, which is about the amount of funds released by a 0.25 percentage point reserve requirement ratio cut. This may be the reason why the reserve requirement ratio cut was not announced at the end of 2024. Previously, when announcing a 0.5 percentage point reserve requirement ratio cut at a press conference held by the State Council Information Office in September 2024, the Governor of the People's Bank of China, Pan Gongsheng, also mentioned that "there are still three months before the end of the year in terms of the reserve requirement ratio tool, and we may further lower it by 0.25 to 0.5 percentage points according to the situation." Therefore, there has been an expectation in the market that there will be another reserve requirement ratio cut within 2024 after the implementation of the reserve requirement ratio cut in September last year. It is worth noting that the wording of the central bank's announcement on open market operations has changed recently. It has adjusted the maintenance of liquidity from "reasonable and abundant" to "abundant". In combination with the setting of "moderately loose" monetary policy, it is clearly believed that buyout reverse repurchase and treasury bond buying and selling will maintain a large scale of liquidity investment, and hedge the tight capital pressure at the end of the year is in line with the current policy demands. From the results, it can be seen that the overall funds were relatively loose in mid to late December last year, and the effectiveness of the two tools was significant. Looking forward to the later stage, it is clearly predicted that the central bank will continue to increase the net purchase scale of large country bonds this year under the demand of monetary coordination with finance and increasing liquidity supply. In addition, as the MLF stock gradually recovers, it is expected that the central bank will also increase its investment in buyout style reverse repurchase to make up for the medium and long-term liquidity gap. Overall, it is expected that both tools will receive more investment by 2025. The current monetary policy tone has shifted from 'prudent' to 'moderately loose', and the Central Economic Work Conference in December 2024 explicitly called for 'timely reserve requirement ratio and interest rate cuts' in 2025 Wang Qing judged that in order to alleviate the pressure on bank deposits, support bank credit injection, and maintain sufficient market liquidity, the reserve requirement ratio cut in the first quarter of 2025 may be implemented, with an expected decrease of about 0.5 percentage points, releasing 1 trillion yuan of funds. This will also release a clear signal of strengthening countercyclical regulation, representing the early entry of a more proactive macroeconomic policy into the comprehensive force stage in 2025. (New Society)