Core Viewpoint - The People's Bank of China (PBOC) is shifting its approach to the Medium-term Lending Facility (MLF) by implementing fixed-quantity, interest-rate bidding with multiple price levels, marking a significant change in its monetary policy strategy [1][5]. Group 1: MLF Operations - The PBOC will conduct a 450 billion yuan MLF operation with a one-year term starting March 25, 2025, to maintain ample liquidity in the banking system [1]. - In March 2025, 387 billion yuan of MLF will mature, resulting in a net liquidity injection of 630 billion yuan after the operation [4]. - The balance of outstanding MLF will be 41.57 trillion yuan after the operation [4]. Group 2: Policy Changes - Since mid-2024, the PBOC has been gradually reducing the policy rate attributes of MLF, with the focus shifting to the 7-day reverse repurchase rate as the main policy rate [4][5]. - The introduction of a multiple price bidding system for MLF signifies a complete withdrawal of its policy rate characteristics, aligning with the PBOC's broader strategy to streamline its monetary policy tools [5][6]. Group 3: Market Implications - The new MLF operation method is expected to lower funding costs for banks, thereby enhancing financial support for the real economy [6]. - The PBOC's liquidity management is anticipated to become more efficient and precise, with a well-rounded toolbox for both short-term and long-term liquidity needs [6].

Core Viewpoint - The People's Bank of China (PBOC) has announced a shift in its Medium-term Lending Facility (MLF) operations to a multiple price bidding system, indicating a significant change in the monetary policy framework and the gradual withdrawal of MLF's policy interest rate attributes [2][3][6]. Group 1: MLF Operation Changes - The MLF will now operate under a multiple price bidding system, moving away from a unified bidding rate, which signifies the complete withdrawal of its policy interest rate characteristics [3][6]. - This change is part of a broader strategy to clarify the role of MLF as a liquidity provision tool, focusing on providing one-year liquidity [6][8]. - The PBOC's liquidity management will become more efficient and precise, balancing multiple objectives with a more scientific and flexible approach [6]. Group 2: Impact on Banking Sector - The adoption of multiple price bidding is expected to lower the overall funding costs for MLF, alleviating pressure on banks' net interest margins [8]. - Currently, the one-year interbank certificate of deposit rate for major banks is around 1.95%, with smaller banks potentially facing higher rates, indicating a market-driven approach to pricing [8]. - The recent MLF operation of 450 billion yuan represents a net injection of 630 billion yuan, marking the first net injection since July 2024, reflecting a moderately accommodative monetary policy stance [8].