China's bond market rattled as central bank squares off with bond bulls
SHANGHAI/HONG KONG - China's bond market, the world's second largest, is on edge following a turbulent week in which the central bank started intervening heavily to stem a plunge in yields even as the economy is struggling.
Even those who have turned bearish appear half-hearted. Treasury futures investor Wang Hongfei said he chose to be"opportunistic" in the short term, trading quickly in skirmishes as the market tussle with regulators intensifies. As the economy sputters,"Chinese officials will face increasing difficulty in maintaining such tightly controlled financial markets, and additional interventions are likely, and may signal the very instability Chinese officials are seeking to avoid."The first shot was fired last Monday, when China's long-dated yields hit record lows amid a global rout that drove money into safe havens such as treasuries.
PBOC Governor Pan Gongsheng was previously head of China's foreign currency regulator, so"it appears to be the same playbook," said a Shanghai-based fund manager. The Shanghai-based fund manager said there's no reason to throw in the towel without seeing clear signs of economic improvement, and his strategy is to"buy on the dip".
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