(Bloomberg) -- China’s state banks sold government bonds in large batches, a move that helped to pull benchmark yields higher from record lows, according to traders.
The state banks offloaded 10-year sovereign notes in batches of 100 million yuan ($14 million), according to three traders onshore. The selling focused on bonds coded as “240011,” which were issued in May and are one of the most actively traded in the government debt market.
China’s 10-year yield erased earlier losses to trade as high as 2.15% amid the selling. Earlier in the day, the rate sank below the closely watched 2.1% level for the first time in history.
The lenders also sold 30-year special government bonds in large sizes, said one of the traders. They asked not to be identified as the information was private.
The move came amid ongoing speculation the People’s Bank of China is primed to intervene in the market to stem a bond rally after yields smashed through one record low after another. Traders had been fixated on Beijing’s pledge to tackle longer-dated yields, given short-term ones had been pushed lower by recent interest-rate cuts to boost the economy.
For months, the PBOC has been torn between preventing a liquidity-driven bubble in the bond market and ensuring borrowing costs remain low to rejuvenate growth. In July, the central bank said it has prepared “hundreds of billions” of yuan of the government debt at its disposal through agreements with lenders, a sign it may be ready to sell them to cool the rally.
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