🇨🇳#BREAKING PBOC Conducts 100 Billion Yuan Swap Facility Operation to Support Capital Markets

China’s central bank on Monday conducted a 100 billion yuan (about $15 billion) operation under its Securities, Funds and Insurance Companies Swap Facility (SFISF), marking the third and largest use of the tool since its launch in late 2024.

The People’s Bank of China (PBOC) said the operation, carried out in response to demand from participating institutions, involved 31 securities and fund companies that submitted bids under a fee-rate auction. The winning fee rate was set at 10 basis points. The swaps have a one-year tenor that can be extended depending on market conditions.

The SFISF allows eligible securities firms, mutual funds and insurers to exchange lower-liquidity assets such as bonds, stock ETFs and CSI 300 constituent stocks for high-grade liquid assets like government bonds and central bank bills. Institutions can then use the resulting funding capacity to buy stocks or make markets in equities, without expanding the overall money supply. The funds must be used specifically for equity investment and market-making.

Monday’s operation significantly exceeds the previous two rounds. The first, in October 2024, totaled 50 billion yuan with 20 institutions participating and a winning fee of 20 basis points. The second, in January 2025, amounted to 55 billion yuan, also with 20 institutions and a lower winning fee of 10 basis points. Outstanding balances from earlier operations stood at about 105 billion yuan before Monday’s auction.

The move comes a day after the PBOC, the National Financial Regulatory Administration and the China Securities Regulatory Commission held joint meetings on capital-market support tools. At those sessions, authorities said the SFISF would continue to be deployed as needed, with more institutions allowed to participate, fees potentially lowered and collateral and operational rules refined. They also announced that the related stock buyback and shareholding increase relending facility would become a permanent institutional arrangement, with its interest rate cut from 1.25% to 1%.

Analysts said the larger size and broader participation in the latest SFISF operation signal that the tool has moved beyond a pilot phase and is gaining wider acceptance among non-bank financial institutions as a way to ease funding constraints and support equity markets. The low 10-basis-point fee is expected to keep the cost of using the facility attractive, encouraging institutions to deploy more capital into stocks and stock ETFs at a time when Chinese equities have faced volatility.

The PBOC has framed both the swap facility and the buyback relending tool as part of efforts to strengthen the capital market’s internal stabilizing mechanisms while maintaining an appropriately accommodative monetary policy stance.