A decision by China's central bank to reintroduce 14-day reverse repos this week after a six-month hiatus will give markets more flexibility, a leading bank official said on Friday, as talk swirled over whether there has been a policy shift.
The People's Bank of China (PBOC) also will continue issuing 7-day reverse repos, and there are signs that its interest rate was following the policy interest rates, central bank vice governor Yi Gang said at a forum in Beijing.
He added that both 7-day and 14-day reverse repos provide ample liquidity for the market.
China's central bank has urged banks to spread out the tenors of their loans, hinting at its displeasure with a recent trend of banks focusing on overnight lending, banking sources told Reuters on Thursday.
Traders fear some smaller banks may be using short-term borrowing to speculate in bond markets.