PBOC cuts bond purchases in sign of wariness over yield declines

[BEIJING] China’s central bank trimmed its government bond purchases to the smallest in nine months in June, suggesting policymakers are turning cautious about potential further yield declines or excessive liquidity.

The People’s Bank of China (PBOC) bought a net 10 billion yuan (US$1.47 billion) of sovereign debt last month, down from 50 billion yuan in May, it said late on Thursday (Jul 2).

That was the least since it resumed such purchases in October 2025, data compiled by Bloomberg showed. 

The reduction in bond buying might also have been influenced by the PBOC’s move to introduce a new overnight maturity for its open-market operations late last month.

The availability of the new short-term tool could reduce the need for it to manage long-term liquidity via its debt purchases.

The PBOC is broadly supportive of keeping liquidity ample, but it does not wish to see the market flooded with excessive cash or a sharp decline in borrowing costs, said Wang Qing, chief macro analyst at Golden Credit Rating.

The result of the bond operations signals that the PBOC might prefer to keep bond yields broadly stable, even as oil prices fall and expectations for inflation abate, he said.

The PBOC is likely to consider halting bond trading again if the 10-year yield drops below 1.7 per cent, he added. 

The central bank first started trading government bonds in 2024 following a proposal by President Xi Jinping, although its purchases have been far from substantial, which differs from the way the US Federal Reserve operates in the Treasury market.

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The PBOC suspended bond transactions from January to September 2025 after bond yields fell, before resuming them on a limited scale in October. BLOOMBERG