SHANGHAI, July 13 (Reuters) – Financial institutions snapping up Chinese treasury bonds are basically shorting the Chinese economy, China’s central bank-backed Financial News reported on Saturday. It cited the views of industry sources and experts. #ChineseTreasuryBonds
The report is the latest warning to the country’s bond market after the People’s Bank of China (PBOC) sounded concerns and introduced plans to sell treasury bonds to cool a bond rally.
It came after the paper said late on Friday that China’s central bank is determined to maintain a normal upward-sloping yield curve and correct bond-market risks.
The PBOC said earlier this month it has hundreds of billions of yuan worth of bonds at its disposal to borrow, and will sell them depending on market conditions. #ChineseTreasuryBonds
The move shows the central bank’s desire to stabilise exchange rate and economic expectations, Financial News reported, citing unnamed experts.
“Financial institutions frantically snapping up government bonds equals to expecting that interest rates will get lower and lower in the future,” the paper said.
“They are basically shorting China’s yuan and the Chinese economy, increasing the pressure for capital outflows.”
Furthermore, the impact of institutions buying Chinese treasury bonds extends beyond financial markets. It underscores the need for robust economic reforms. Thus, addressing underlying issues is crucial for long-term stability.
