PBOC injects cheap funds using long-term lending tool

Hong Kong

CHINA is pressing ahead with its own version of Operation Twist as a surge in municipal debt issuance swamps the bond market, driving up long-term yields.

The People's Bank of China (PBOC) added cheap funds to the banking system recently using a long-term lending tool, according to media reports on Monday and Tuesday. The yield on 10-year sovereign bonds has risen 29 basis points since the end of April, even as cuts in interest rates and reserve requirements pushed one-year borrowing costs lower. The gap between the rates, a measure of the yield curve, is the biggest it's been since 2010.