China's central bank prepares to intervene directly in bond markets
Central bank warns of bond bubble, signs hundreds of billion yuan worth of borrowing agreements
PBOC now prepared to sell bonds in a bid to stabilise financial markets
SHANGHAI July 5 Reuters - Chinas central bank has hundreds of billions of yuan worth of bonds at its disposal to borrow and will sell them depending on market conditions the. The Peoples Bank of China PBOC has issued over 10 separate warnings since April about the risk that a bond bubble could burst destabilizing financial markets.
Chinas central bank plans to intervene directly in bond markets in a sign of officials growing discomfort with a rally that has pushed borrowing costs to the lowest. For weeks the Peoples Bank of China has voiced concern about a bubble forming in the countrys sovereign bond market Now it has moved from talking.
Chinas central bank has signed agreements with major brokers to borrow hundreds of billions of yuan worth of government bonds a move analysts say is.
The move is the clearest sign yet that Chinas central bank is willing to intervene directly in the bond market to prevent a bubble from bursting. In recent months, bond yields have fallen to record lows, and there are concerns that a sudden reversal could destabilize the financial system.
The central banks intervention is a significant development, and it will be closely watched by investors and analysts. If the central bank is successful in preventing a bond bubble from bursting, it will be a major victory for China. However, if the central bank is unsuccessful, it could lead to a financial crisis.
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