China central bank doubles overnight cash injection, keeps rate unchanged, sources say

June 30 (Reuters) - China's central bank ramped up liquidity injections on Tuesday, doubling the amount of cash supplied through overnight reverse repos as seasonal month-end demand intensified.

The People's Bank of China (PBOC) offered 600 billion yuan ($88.3 billion) to financial institutions through the overnight reverse repos in open market operations on Tuesday, it said in an online statement, without disclosing the borrowing cost.

The PBOC also injected 69.5 billion yuan through seven-day reverse repos, with the rate unchanged at 1.4%, according to the statement.

Sources told Reuters that the PBOC left the interest rate on the new overnight liquidity tool unchanged at 1.25% from the inaugural operation a day earlier, and it was 15 points below the seven-day tenor.

The seven-day reverse repo rate serves as China's primary policy rate.

"The overnight reverse repo looks more like a liquidity provision tool at this stage, similar to outright repos and medium-term lending facility (MLF) loans," Xinquan Chen, China economist at Goldman Sachs, said in a note.

"The PBOC's decision not to disclose the rate likely aims to preserve the seven-day reverse repo rate's role as the main policy rate and to avoid confusing the market before the new tool becomes operationally mature."

The overnight reverse repo gives the PBOC a new tool to steer liquidity conditions and borrowing costs, helping stabilize the economy during periods of heightened money market volatility at month- and quarter-end.

Tuesday's liquidity injection through the new facility should ensure financial institutions navigate month-end and half-year-end funding pressures smoothly, as they bolster cash positions to meet administrative and regulatory requirements, bond traders said.

Reflecting the ample liquidity, the volume-weighted average rate of the benchmark overnight repo in the interbank market, a gauge that measures general liquidity conditions, traded at 1.3466%, down 0.7 basis point from the previous close.

($1 = 6.7936 Chinese yuan) (Reporting by Reuters Staff; Editing by Tom Hogue and Shri Navaratnam)