Chinese government bonds have seen a notable recovery following the People’s Bank of China’s (PBOC) move to increase short-term liquidity support. On Wednesday, yields on the key 10-year government bonds dropped by 3 basis points, reaching 1.84%, marking a third consecutive day of decline. Meanwhile, futures for the 30-year notes surged by up to 1%, the highest jump since late December.
This positive shift in the bond market follows a significant intervention by the PBOC, which injected a net total of 973.2 billion yuan ($134.6 billion) into the money market over the past four days. This move marks the end of a two-week period of tightening and represents the longest streak of liquidity injections since late January. The additional cash signals growing concern from the central bank about the risks arising from the recent bond selloff, which was partly driven by surging stock prices.
Analysts, including Liu Yu from Huaxi Securities, believe that the PBOC’s continued support will prevent the bond market from further deteriorating and restore investor confidence. “With these injections, the bond market has the potential tod enter a more stable and moderately bullish phase,” they noted in a report.
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