Approaching the May Day holiday, the People's Bank of China has increased its reverse repurchase operations. On April 27, according to the announcement on the official website of the People's Bank of China, in order to maintain sufficient liquidity in the banking system, on April 27, 2025, the People's Bank of China carried out a RMB 90 billion reverse repurchase operation in the form of fixed interest rate and quantitative bidding, with a duration of 7 days and an operating interest rate of 1.5%, consistent with the previous operation. According to Wind data, there was no reverse repurchase due on April 27th, and a net investment of 90 billion yuan was achieved on that day. The reporter noticed that recently, the People's Bank of China's reverse repurchase operations have shown more flexibility, with fund sizes concentrated above the level of 100 billion yuan, and most of them are net investments. During this week (April 21-27), only the reverse repurchase days on April 24th and 25th achieved net buybacks of 27.5 billion yuan and 91 billion yuan, respectively. Other times were net investments, with a net investment scale ranging from 3.5 billion yuan to 133 billion yuan. The change in the amount of reverse repurchase investment is directly reflected in the market funds. On April 27th, the Shanghai Interbank Offered Rate mostly increased. Among them, the overnight Shibor rate was reported at 1.606%, up 3.9 basis points; Shibor rose 0.3 basis points to 1.641% in 7 days. Among various varieties, only the 6-month Shibor fell 0.1 basis points to 1.76%. From the performance of repurchase interest rates, according to data from China Money Network, on April 27th, the weighted average interest rate of DR007 rose to 1.713%, higher than the policy interest rate level. On April 25, the 1-day reverse repo rate (GC001) of the Shanghai Stock Exchange closed at 1.68%. Wang Qing, Chief Macro Analyst of Dongfang Jincheng, pointed out that the market interest rates rose on April 27th mainly due to the approaching end of month bank assessments, especially the upcoming May Day holiday, active public travel and consumption activities, and increased demand for bank withdrawals. The capital situation itself showed a tightening trend, which is in line with seasonal patterns. In addition to the requirement of the Political Bureau meeting of the Communist Party of China Central Committee to "maintain sufficient liquidity", Wang Qing judged that the People's Bank of China will increase its net investment in the open market in the first few trading days before the end of April, curb the rapid upward trend of market interest rates, and release signals of monetary policy to strengthen support for the real economy. In addition to the short-term liquidity brought by reverse repurchase, in this month's open market operations, the People's Bank of China launched a 600 billion yuan MLF (Medium Term Lending Facility) operation on April 25th through a fixed quantity, interest rate bidding, and multi price bidding method, with a term of one year. According to Wind data, a total of 100 billion yuan of MLF expired in the month, and a net investment of 500 billion yuan in medium and long-term liquidity was achieved in April. After the operation is implemented, the MLF balance will be 465.7 billion yuan. This is also the second consecutive month of MLF's expansion, with a significant increase in volume compared to last month's 63 billion yuan. Regarding monetary policy, on April 25th, the Politburo meeting of the Communist Party of China Central Committee proposed to accelerate the implementation of more proactive macro policies, make full use of more proactive fiscal policies and moderately loose monetary policies. Timely reserve requirement ratio and interest rate cuts, maintain sufficient liquidity, and strengthen support for the real economy. For the post holiday market trend, Wang Qing predicts that the post holiday fund orientation will be broad, and the People's Bank of China will use large-scale reverse repurchase to implement net capital withdrawal upon maturity, maintaining the basic stability of market interest rates, which is also a seasonal pattern over the years. Overall, compared to the previous period, market liquidity will be relatively loose in the near future. The main reason is that the external environment changed sharply in early April, and domestic policies are shifting significantly towards expanding domestic demand and promoting growth, with "maintaining sufficient liquidity" being an important focus. This will fully hedge against factors such as the peak of government bond issuance, and bring a more significant easing effect to the funding side. Wang Qing believes that the DR007 central nervous system will experience a certain degree of downward movement in the future. In addition, after a large increase in MLF volume of 500 billion yuan in April, the buyout reverse repurchase will still be in a net investment state this month, guiding the stability and breadth of short and mid-range liquidity. Taking into account the current changes in the external economic and trade environment, the trend of the real estate market, and the price level, the timing for the "timely reduction of reserve requirement ratio and interest rate" in the second quarter is ripe, and the landing time may be moderately advanced, which will also guide the follow-up reduction of funding interest rates. (New Society)