Cheng Leng of the Financial Times reports that the People’s Bank of China is struggling to convince traders that the market is overheating. Leng writes:
China’s bond yields have fallen to record lows as investors respond to deflationary forces in the world’s second-largest economy and shrug off repeated warnings from the central bank that a bubble is forming in the sovereign bond market. The yield on the 10-year bond, which moves inversely to prices, fell to 2.13 per cent on Thursday while 30-year note yields also dropped to 2.37 per cent.
The yield on the 10-year bond, which moves inversely to prices, fell to 2.13 per cent on Thursday while 30-year note yields also dropped to 2.37 per cent.
Investors have been defying warnings from the People’s Bank of China that the frenzied buying risks creating a Silicon Valley Bank style banking crisis. […]
However analysts warn that the PBoC’s goal of higher yields to stave off a SVB-style collapse in the banking system is clashing not only with the market but the finance ministry’s desire for lower yields, since it would mean the government could issue bonds at a lower cost. “It takes both guts and time to prove the market is wrong or validating that the PBoC is correct. However, time is not always an ally of the central bank,” the researcher said.
“It takes both guts and time to prove the market is wrong or validating that the PBoC is correct. However, time is not always an ally of the central bank,” the researcher said.
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