China's central bank to resume bond trading on open market

[BEIJING] China’s central bank will resume buying and selling treasury bonds on the open market, People’s Bank of China governor Pan Gongsheng said on Monday (Oct 27), state media Xinhua Caijing reported.

China’s central bank has not conducted any bond trading operations since December 2024. It has been carefully managing liquidity conditions this year to aid the broad economy without reigniting a strong bond rally seen in late 2024, which policymakers had feared could fuel asset bubbles and trigger financial instability.

“At the beginning of this year, the PBOC suspended the trading of treasury bonds in view of the high pressure of unbalanced supply and demand in the bond market and the accumulation of market risks,” Pan was quoted as saying.

“At present, the overall bond market is operating well, and the PBOC will resume open market bond trading operations,” Pan was quoted as saying at a forum in Beijing.

China’s 10-year government bond yield fell sharply by 2 basis points following Pan’s comments, while the 30-year yield dropped 3 basis points.

The PBOC will “maintain its supportive monetary policy stance and implement moderately loose monetary measures,” Pan said, reaffirming the central bank’s current policy stance.

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The central bank will deploy various policy tools to provide short-, medium- and long-term liquidity arrangements while ensuring relatively loose financing conditions in the economy, he said.

The PBOC last cut interest rates and banks’ reserve requirement ratio in May, in an effort to soften the economic damage caused by a trade war with the United States.

Analysts remain divided on whether the PBOC will take further easing measures such as cutting rates by year-end.

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Pan also said the central bank would support more commercial banks to become digital yuan operators and would continue to crack down on digital currency speculation, according to the report.

“The PBOC, together with law enforcement agencies, will continue to crack down on the operation and speculation of domestic virtual currencies, maintain economic and financial order, and at the same time closely track and dynamically evaluate the development of overseas stablecoins,” he said.

Hong Kong, which has established a regulatory regime for stablecoins, has not yet awarded any licences to issuers. In China, cryptocurrency trading has been banned since 2021.

Last month, China launched the world’s first regulated offshore yuan-linked stablecoin in Kazakhstan, signalling its intention to chip away at the dollar’s dominance in the crypto space. REUTERS