China Weighs Overnight Rate as Primary Policy Benchmark

China’s central bank is considering shifting its main open-market operations from a seven-day to an overnight tenor, which would make the overnight reverse repo rate its primary policy benchmark. Governor Pan Gongsheng said the change would align the central bank’s tools with the heavily traded overnight interbank market, where the DR001 rate already serves as a de facto target, and could improve monetary-policy precision. Because the overnight rate is currently below the seven-day benchmark, some analysts say the switch could ease borrowing costs, though it would not necessarily constitute a rate cut and the rate to be used under the new framework remains unclear. After the announcement, the offshore yuan rose slightly, while Chinese government bond yields were little changed overall.