China’s central bank injected 601.8 billion yuan to stop a growing bond selloff
The post China’s central bank injected 601.8 billion yuan to stop a growing bond selloff appeared on BitcoinEthereumNews.com. China’s central bank dropped a bomb of cash on Friday. The People’s Bank of China (PBOC) pushed 601.8 billion yuan, about $84 billion, into the system using reverse repurchase agreements, trying to slow down a snowballing bond selloff before it smashes through the financial system. This was the biggest daily liquidity injection since January. Bond yields had been spiking for a week. Specifically, China’s 30-year government bond yield climbed seven straight days. That finally changed Friday. The surge stopped. Futures tied to the same bonds also paused a losing streak that had dragged on for more than two years, so the central bank stepped in because the selloff risk was turning into a full-blown panic. Redemptions trigger heavy withdrawals from bond funds This problem has been building for quite some time. Longer-dated bond prices have dropped, and Chinese authorities are now on edge. Two things are draining demand: a shaky U.S.-China trade truce, and China’s effort to fight deflation. That’s made it harder for bonds to stay attractive. Data showed redemption pressure spiked on Thursday. A key metric tracking fixed-income fund redemptions hit its highest level since October. The cause? Bond holdings by funds have nearly doubled in two years, so there’s more at risk when people start pulling out money. According to Huatai Securities, this kind of pressure doesn’t ease on its own. Analysts led by Zhang Jiqiang warned, “Judging from past experiences, the bond market may see amplified pressure once fund redemptions start.” If investors keep withdrawing, funds will have to sell more bonds, which only pushes prices lower and fuels more exits. They added that unless the PBOC keeps pumping liquidity, either through open market operations or buying bonds directly, this could spiral. Another way to stop the bleeding might be slowing down gains in the stock…
The post China’s central bank injected 601.8 billion yuan to stop a growing bond selloff appeared on BitcoinEthereumNews.com.
China’s central bank dropped a bomb of cash on Friday. The People’s Bank of China (PBOC) pushed 601.8 billion yuan, about $84 billion, into the system using reverse repurchase agreements, trying to slow down a snowballing bond selloff before it smashes through the financial system. This was the biggest daily liquidity injection since January. Bond yields had been spiking for a week. Specifically, China’s 30-year government bond yield climbed seven straight days. That finally changed Friday. The surge stopped. Futures tied to the same bonds also paused a losing streak that had dragged on for more than two years, so the central bank stepped in because the selloff risk was turning into a full-blown panic. Redemptions trigger heavy withdrawals from bond funds This problem has been building for quite some time. Longer-dated bond prices have dropped, and Chinese authorities are now on edge. Two things are draining demand: a shaky U.S.-China trade truce, and China’s effort to fight deflation. That’s made it harder for bonds to stay attractive. Data showed redemption pressure spiked on Thursday. A key metric tracking fixed-income fund redemptions hit its highest level since October. The cause? Bond holdings by funds have nearly doubled in two years, so there’s more at risk when people start pulling out money. According to Huatai Securities, this kind of pressure doesn’t ease on its own. Analysts led by Zhang Jiqiang warned, “Judging from past experiences, the bond market may see amplified pressure once fund redemptions start.” If investors keep withdrawing, funds will have to sell more bonds, which only pushes prices lower and fuels more exits. They added that unless the PBOC keeps pumping liquidity, either through open market operations or buying bonds directly, this could spiral. Another way to stop the bleeding might be slowing down gains in the stock…
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