News
Institutions buying Chinese treasury bonds are selling the economy short, state media says
SHANGHAI (Reuters) – Financial institutions buying Chinese government bonds are essentially short-selling the Chinese economy, China’s central bank-backed Financial News reported on Saturday, citing what it said were views from industry sources and experts.
The report is the latest warning to the country’s bond market after the People’s Bank of China (PBOC) voiced concerns and outlined plans to sell treasury bonds to cool the bond rally.
The news came after the newspaper said on Friday that China’s central bank is determined to maintain a normal upward-sloping yield curve and correct bond market risks.
The People’s Bank of China said earlier this month it has hundreds of billions of yuan worth of bonds available to borrow and will sell them depending on market conditions.
The move shows the central bank’s desire to stabilize the exchange rate and economic expectations, Financial News reported, citing unnamed experts.
“Financial institutions frantically buying government bonds is tantamount to expecting interest rates to get lower and lower in the future,” the paper said.
“They are essentially shorting the Chinese yuan and the Chinese economy, increasing pressure for capital outflows.”
(Reporting by Shanghai Newsroom; Editing by Muralikumar Anantharaman)