Reported about 1 year ago
Against the backdrop of long-term interest rates continuing to decline, on July 5, 2024, it was reported that the People's Bank of China had signed bond borrowing agreements with several major financial institutions in mainland China, with a borrowing capacity amounting to billions of renminbi. This news led to a collective decline in mainland government bond futures on the morning of the 5th, with the main contract for the 30-year term dropping 0.31%, 10-year term dropping 0.14%, 5-year term dropping 0.07%, and 2-year term dropping 0.02% by the end of the day. Market reports indicated that the People's Bank of China had preliminarily selected Industrial and Commercial Bank of China and Postal Savings Bank for bond borrowing, aiming to suppress the overheated bond market by borrowing and then selling bonds back to the market. The People's Bank of China confirmed on the 5th that the financial institutions under agreement could lend billions of yuan worth of medium- to long-term government bonds, using an open-ended, credit-based borrowing approach dependent on market conditions, continuing to borrow and sell government bonds. Due to factors such as poor stock market performance, economic pressure, ample liquidity in the financial system, and the issuance of extra-long-term special government bonds to boost fiscal stimulus, China's government bond yields have significantly decreased. Analysts suggest that the People's Bank of China selling government bonds could absorb interbank liquidity, potentially necessitating offset measures like reducing reserve requirements. In the medium term, considering the absence of substantial economic fundamentals and large-scale stimulus measures in China, the People's Bank of China might resort to interest rate cuts.
Source: YAHOO