(Bloomberg) -- China’s central bank issued another veiled warning on a months-long government bond market rally, underlining its discomfort with decades-low yields that have weighed on the nation’s currency.

The People’s Bank of China said “long-term government bond yields will better match the future economy’s improving trend” and that “bond market supply and demand will likely become more balanced,” in a special section of its first-quarter monetary policy report published Friday. It cited factors including accelerating issuance of sovereign bonds.

The central bank has pushed back on the bull run in the bond market, which has driven yields on some sovereign notes to the lowest in more than two decades. The widened gap between Chinese yields and US rates, which have stayed elevated, has undermined the appeal of China’s yuan. Super-low yields also reflect pessimism about the economy, which the PBOC is trying to stimulate. 

China’s Central Bank Rebuffs Bond Bulls on Market Bubble Worries

The PBOC also signaled efforts to address deflationary pressures in the report, vowing that it will make mild inflation an important consideration for monetary policy. It also said it would step up policy coordination to keep prices at reasonable levels. The pledge comes ahead of price data due Saturday, which is expected to show that China’s consumer inflation remains at a low level of 0.2% year-on-year.

The PBOC reaffirmed it will keep the yuan basically stable at a reasonable, equilibrium level, and vowed it will “resolutely prevent” currency over-adjustment. It also tried to assuage concerns over the country’s slowing credit growth, saying that it’s still sufficient to support the economy.

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