Generally, we are familiar with the reverse repurchase of government bonds, which can be operated by individual investors. So, what does the central bank mean by reverse repurchase? What does it mean for the central bank to cut the reverse repo rate? Xi Cai Jun has prepared relevant contents for your reference.

What is the central bank's reverse repurchase?

Reverse repurchase means that the People's Bank of China buys securities from primary dealers and agrees to sell the securities to primary dealers on a specific date in the future. That is, the central bank lends money to commercial banks, and commercial banks pledge bonds to the central bank. When they mature, the commercial bank repays the funds and the bonds return to the account of the commercial bank.

The central bank's reverse repurchase is mainly released to the market, and of course it can also earn interest income from repurchase. The expiration of reverse repurchase is the operation of the central bank to recover liquidity from the market.

For example, on August 7, 20 13, the central bank conducted a 7-day reverse repurchase operation of168 billion yuan, and the winning bid rate was 1.80%. This means that the central bank will put 654.38+068 billion yuan into the market in the next seven days. After the expiration of seven days, the central bank will recover the funds, and commercial banks will pay the central bank 654.38+0.80% (annual interest rate).

At the same time, there are still 5 billion yuan of 7-day reverse repurchase due today, which means that the central bank has recovered 5 billion yuan and achieved a net investment of 654.38+063 billion yuan that day.

What does it mean for the central bank to cut the reverse repo rate?

The reduction of the central bank's reverse repo rate means that the loan interest of commercial banks borrowing money from the central bank is reduced, and the cost of banks is reduced, which can provide enterprises with lower loan interest rates. After the enterprise obtains funds, it can alleviate the short-term financial difficulties and the company can operate normally.

After the central bank carries out reverse repurchase, it lends money to commercial banks, and the amount of money in circulation increases, and some funds will flow into the stock market, so it can also stimulate the stock price to rise, which is good for the stock market.