CGB Yields Off Multi-Decade/All-Time Lows As PBoC Borrows Bonds From Some Primary Dealers

Benchmark CGB yields move off session lows as the PBoC notes that it has decided to borrow bonds from some primary dealers, as it seeks to maintain the steady operation of the bond market.

• The Bank also notes that the decision came after the “careful observation and evaluation” of current market conditions.
• This shows that the Bank is attentive to the broader market situation, with wide held easing expectations helping some of the benchmark measures to fresh multi-decade/all-time lows ahead of the operations.
• The PBoC had been keen to play down similarities between its CGB operations and the typical QE that the world has become accustomed to in post-GFC times, highlighting the likely two-way nature of the operations in recent weeks.
• The operations are seen as a market liquidity management tool at the PBoC.
• Benchmark yields are now flat to 3bp higher on the day, as the curve bear steepens.
• USD/CNH sees a modest downtick alongside that move, moving from close to 7.3040 to 7.3006, before recovering to 7.3025 last.