Core Viewpoint - The People's Bank of China (PBOC) is implementing a fixed quantity, interest rate auction, and multiple price bidding model for reverse repos starting from October 2024, indicating a shift towards a more market-oriented approach in liquidity management [2][4]. Group 1: Reverse Repo Operations - On June 6, 2025, the PBOC will conduct a 1 trillion yuan reverse repo operation with a 3-month term, amidst 1.2 trillion yuan of reverse repos maturing in June [1][3]. - The new auction model for reverse repos will resemble the Medium-term Lending Facility (MLF) operations, with fixed quantity and interest rate determined by market bidding [2][4]. - The PBOC's approach aims to maintain reasonable liquidity levels, with reverse repos providing 3-month and 6-month funding options, while MLF will offer 1-year funding [2][3]. Group 2: Liquidity Management - In May, the PBOC's long-term liquidity supply exceeded 1 trillion yuan, countering government bond repayment pressures, with net repayments of 910.2 billion yuan for government bonds being the highest since 2025 [3]. - The PBOC is expected to continue net injections through MLF in June, with a low pressure for excess renewals due to the smaller MLF maturity scale of 182 billion yuan [3][5]. - The central bank's liquidity management strategy remains focused on maintaining ample liquidity through various tools, including reverse repos and MLF, while observing the impact of recent interest rate cuts [5]. Group 3: Pricing Mechanism - The pricing for reverse repos will be more market-driven, similar to MLF, with the interest rates likely aligning with the yields of corresponding maturity interbank certificates of deposit [4]. - The PBOC is expected to maintain a non-disclosure policy for the winning bid rates in reverse repos, ensuring that the 7-day reverse repo rate remains the primary policy rate [4]. Group 4: Future Outlook - Following the recent interest rate cuts and reserve requirement ratio reductions, the focus will shift to the effectiveness of reverse repos and other conventional operations in the upcoming months [5]. - The next significant policy direction observation is anticipated during the Central Political Bureau meeting in July, with expectations for continued loose monetary policy through various liquidity tools [5].