China: Central Bank urgently suspends Bond Markets to Support Wan · Global Voices

Its central bank announced it would suspend the state market , its last attempt to mitigate investor bets on weak economic growth that have undermined Wan and weakened confidence between business and consumers. As Bloomberg reports, the People’s Bank of China (PBOC) will stop sovereign debt markets this month, as bond offering falls short of demand, he said in a announcement Friday. The central bank will choose a time to continue the markets according to market conditions, he added. CORVERSE The yields of the bonds had plummeted to a historical low, due to the stakes for aggressive relaxation of the policy to revitalise the subdued economy and demand for asset-reserves. Investors have turned to bonds amid a prolonged property crisis, weak consumption, and deinflation concerns. China’s currency has fallen towards a low record in offshore markets. The move reflects the authorities’ dissatisfaction with the abrupt movements of government bond yields and Wan’s increasing devaluation pressure, Ken Cheng, chief strategic currency analyst in Asia, Mizuho Bank said. “The level of returns should already have aggressive pricing of PBOC’s relaxation this year, while Wan will remain under pressure due to fixed dollar and duty threats”. The yields of China’s state bonds increased across the curve after the announcement, with the five-year interest rate climbing up to eight basis points and the ten-year interest rate earning four base points at 1.675%. The offshore wan has risen 0.1%. CORVERSE PBOC revised its policy framework last year and added the negotiation of state bonds as a liquidity management tool in the economy, a step to work more like its global counterparts. But the use of its tool has been challenged by the bond rally, a problem for PBOC because of its concerns about financial risks and the pessimistic message it sends about the prospects of growth. Bond investors have never been so negative about the world’s second largest economy, with some now betting on a deflator spiral. International dynamics favour the dollar while the Wan has fallen and negotiates near the weak end of its allowed zone against the American currency, despite efforts by the authorities to stabilise the exchange rate.