Core Viewpoint - The article discusses the potential introduction of new monetary policy tools in China, particularly focusing on the establishment of ONRRP-like tools and two-way overnight repos to manage liquidity and interest rate fluctuations in the financial market [1][2]. Group 1: New Monetary Policy Tools - The possibility of creating tools aimed at non-bank institutions, similar to the Federal Reserve's ONRRP, is highlighted. These tools would primarily serve to prevent excessively low funding rates [1]. - The central bank has indicated a shift towards providing liquidity to non-bank institutions under specific scenarios, moving from "exploring" to "establishing" such mechanisms [2]. - The new mechanism is expected to be non-regular and specifically target non-bank entities, aiming to reduce funding stratification and volatility [2]. Group 2: Two-Way Overnight Repos - The introduction of two-way overnight repos for commercial banks is seen as a natural extension of DR001 becoming the benchmark interest rate. This would align the new repo with the existing policy rate [3]. - The current weighted average of DR001 has returned to 1.36%, supporting the view that the new repo could replace the 7-day OMO as the primary policy rate [3]. Group 3: Necessity of Short-Term Innovations - The necessity for short-term innovations in monetary policy tools is considered relatively limited, as the 7-day OMO rate is expected to be confirmed as the sole policy rate by mid-2024 [4]. - The overlapping functions of the proposed two-way repos and existing tools suggest that immediate changes to the toolset may not be essential [4]. - The current operational framework, which includes high-frequency OMO and low-frequency reserve requirement ratio adjustments, is deemed effective, indicating that there may not be a pressing need for a complete overhaul of the toolset [4].

Report Industry Investment Rating - Not mentioned in the provided content Core Viewpoints - In the future, there is a possibility of newly establishing ONRRP-like tools and two-way overnight repos after the benchmark interest rate changes from DR007 to DR001 [7][9] - The goal of the central bank's monetary policy iteration in the past two years is to further reduce the volatility of capital interest rates and capital stratification [7][12] - The current "OMO high-frequency, buyout/MLF/treasury bond trading medium-frequency, reserve requirement ratio cut low-frequency" tool system is effective, and there is limited necessity to introduce new tools in the short term [7][16] Summary by Relevant Catalogs ONRRP-like tools and two-way overnight repos may have impacts Conjecture about ONRRP-like tools - A new tool for non-bank institutions may be similar to the Fed's ONRRP, but currently, there is no motivation to directly regulate the lower limit of capital interest rates. The new tool is more likely to be a liquidity injection rather than a withdrawal [10][12] - The new mechanism for non-bank institutions is used in "specific scenarios" and aims to reduce capital stratification and volatility, similar to the Fed's PDCF [12][13] How to view two-way overnight repos - Logically, a newly created two-way overnight repo for banks is a natural extension after DR001 becomes the benchmark interest rate and should replace the 7-day OMO as the new policy rate [15] - In the short term, there is limited necessity to introduce new two-way overnight repos as they overlap with the functions of the 7-day OMO and temporary repos [16]

1. Report Industry Investment Rating - No information about the industry investment rating is provided in the report. 2. Core Viewpoints of the Report - From January 19 - 23, 2026, the central bank's short - term reverse repurchase had a net injection of 22.95 billion yuan, the treasury cash fixed - deposit matured at 15 billion yuan, and the January MLF had a net injection of 70 billion yuan. The government bond net payment scale increased, the inter - bank certificate of deposit (CD) maturity yield declined, and the average inter - bank bond market leverage ratio decreased slightly during January 19 - 25, 2026. From January 26 - February 1, 2026, the government bond is expected to have a net payment of 51.5 billion yuan, and the CD maturity scale is about 42.84 billion yuan. On January 23, 2026, the median durations of medium - long - term and short - term interest - style pure bond funds decreased by 0.62 years and 0.26 years week - on - week respectively [1]. 3. Summary by Relevant Categories Funds - **Central bank operations**: From January 19 - 23, 2026, the central bank's 7 - day reverse repurchase had a net injection of 22.95 billion yuan, the treasury cash fixed - deposit matured at 15 billion yuan, and the MLF had a net injection of 70 billion yuan. In total, the central bank's outright reverse repurchase and MLF had a combined net injection of 100 billion yuan in January 2026 [5]. - **Fund interest rates**: From January 19 - 23, 2026, the average values of DR001 and R001 were 1.37% and 1.43% respectively, up 0.6 basis points and basically unchanged compared with January 12 - 16, 2026. The average values of DR007 and R007 were 1.49% and 1.54% respectively, down 1.6 basis points and 1.4 basis points compared with January 12 - 16, 2026. The main influencing factor for the week was the high tax payment scale. Future factors disturbing the funds include high government bond net payment, funds entering the cross - month stage, and the continuous "good start" of bank credit consuming bank excess reserves [6]. - **Government bond net financing**: From January 19 - 25, 2026, the government bond net financing was about 24.65 billion yuan, an increase of about 29.5 billion yuan compared with January 12 - 18, 2026. From January 26 - February 1, 2026, the government bond net financing is expected to be about 51.503 billion yuan [7]. Inter - bank Certificates of Deposit - **Maturity yield**: As of January 23, 2026, the 1M and 3M CD maturity yields were 1.4950% and 1.5750% respectively, down 2.5 basis points and 2.0 basis points compared with January 16, 2026. The 1Y CD maturity yield was 1.5950%, down 3.0 basis points compared with January 16, 2026. The decline in CD interest rates may be due to the slight warming of the bond market sentiment at the beginning of 2026 and better bank deposit absorption at the beginning of the year, reducing the supply pressure [8]. - **Net financing**: From January 19 - 25, 2026, the CD net financing was about - 11.81 billion yuan. From January 26 - February 1, 2026, the CD maturity repayment amount is expected to be 42.84 billion yuan, with the maturity renewal scale decreasing [8]. Institutional Behavior - **Inter - bank bond market leverage ratio**: From January 19 - 23, 2026, the average calculated inter - bank bond market leverage ratio was 107.81%, compared with 107.88% from January 12 - 16, 2026 [9]. - **Bond fund duration**: On January 23, 2026, the median duration (MA5) of medium - long - term interest - style pure bond funds was 4.33 years, down 0.62 years week - on - week, at the 79.3% quantile since the beginning of 2022. The median duration (MA5) of short - term interest - style pure bond funds was 1.61 years, down 0.26 years week - on - week, at the 27.8% quantile since the beginning of 2022 [9].