Chinese markets are abuzz with speculation that the central bank is preparing to purchase government bonds. However, the People’s Bank of China is facing a challenge as many other investors are also eager to buy these bonds.
With limited options for lending or investing money, banks have been heavily investing in the low-risk government debt issued by Beijing. This surge in demand has led to a six-month rally, driving China’s sovereign yields to their lowest levels in over two decades. This trend is unique in the global market, prompting the PBOC to take action to reverse it.