China’s central bank, the People’s Bank of China (PBOC), announced on Friday a pause in its treasury bond acquisition due to a shortage in availability, a move that sent shockwaves through the bond market, pushing yields up across different durations.
The PBOC has indicated that the suspension is temporary and its bond purchasing activities will resume based on the dynamics of supply and demand within the government bond market. This decision follows repeated cautionary signals from the PBOC regarding the potential risks of market bubbles in China’s fervent bond sector, notorious for its historically low yields on long-term maturities.
Following the announcement, the yield on China’s 30-year treasuries climbed by five basis points in morning trading, with the 10-year yield increasing by four basis points, highlighting the market’s immediate reaction to the supply constraints and regulatory stance.
