Investment Rating - Industry Rating: Outperform the Market (maintained rating) [6] Core Viewpoints - The People's Bank of China officially launched the buyout reverse repurchase operation tool in October 2024, which includes 3M and 6M maturity products, using fixed quantity, interest rate bidding, and multiple price bidding methods [1][12] - The buyout reverse repurchase operation has raised market concerns regarding its volume, price, frequency, and duration, indicating its significant impact on liquidity management for banks [12][24] Summary by Sections Question 1: How is the buyout reverse repurchase quantitatively defined? - The central bank announces a fixed quantity, and banks report their volumes, with the central bank conducting "American-style bidding" based on interest rates. It is expected that the operation will be fully subscribed, primarily benefiting state-owned banks due to their stronger demand for funds compared to smaller banks [2][13][14] Question 2: How is the buyout reverse repurchase priced, and what is its relationship with interest rate cuts? - The buyout reverse repurchase uses interest rate bidding, where banks quote multiple prices. The pricing is expected to be lower than similar market rates, but it may sometimes exceed them due to various factors including policy rates and market conditions [3][15][18] Question 3: How often is the buyout reverse repurchase conducted each month? - There is no fixed frequency for the buyout reverse repurchase operations, which can occur multiple times within a month if necessary. The operations are expected to continue twice a month, especially during periods of tighter liquidity [4][19][20] Question 4: What impact does the buyout reverse repurchase operation have on bank liquidity? - The primary impact is on expectation management. If operations fall short of expectations, it may increase banks' precautionary funding needs, leading to higher rates for certificates of deposit and increased volatility in funding rates. Conversely, exceeding expectations can stabilize monthly funding rates [5][24][25]