Chinese Central Bank Blowing Hard As It Can To Keep Bond Bubble Inflated

He sees what you're doing, Gyna.
By Kazbeki (Own work) [GFDL or CC BY-SA 3.0], via Wikimedia Commons

By Kazbeki (Own work) [GFDL or CC BY-SA 3.0], via Wikimedia Commons

Chinese investors are a little bit spooked by the country’s slowing growth, bursting asset bubbles and Janet Yellen calling President Trump’s bluff. Spooked enough to send the country’s five- and 10-year bond futures to their biggest-ever drops. So the People’s Bank called a timeout and reinflated those particular bubbles with $22 billion.

“People woke up to the fact that the bond bubble is too large,” said Hao Hong, co-head of research at Bocom International, which is owned by Hong Kong’s Bank of Communications. “The bond market in China is under severe pressure, across the board.”

The rumor mill doesn’t help, either.

A midsize Chinese brokerage denied a report in a major Chinese newspaper that it had defaulted on a large bond payment. One of the country’s biggest fund managers, meanwhile, denied a rumor circulating on cellphone chat groups that it was facing large redemptions.

Analysts said such rumors carried weight because many fund managers are heavily in debt, making them vulnerable to declining bond prices.

China Halts Trading in Key Bond Futures as Panicky Investors Sell Securities [WSJ]