The central bank takes action!
On July 1, the Open Market Operations Office of the People's Bank of China issued an announcement that in order to maintain the stable operation of the bond market, based on prudent observation and assessment of the current market situation, the People's Bank of China decided to conduct treasury bond borrowing operations for some primary dealers in open market operations in the near future.
Treasury bond futures plunged across the board. As of press time, the decline in treasury bond futures continued to expand, with the main 30-year contract falling by more than 1%, the main 10-year contract falling by nearly 0.4%, and the main 5-year contract falling by more than 0.2%. The upward range of the yield of major interbank interest-bearing bonds continued to expand, with the yield of the 10-year active bond "24 Guokai 05" rising by 3.35bp, the yield of the 10-year active bond "24 Interest-bearing Treasury Bond 04" rising by 3.75bp, the yield of the 20-year active bond "24 Special Treasury Bond 02" rising by 4bp, and the yield of the 30-year active bond "23 Interest-bearing Treasury Bond 23" rising by 3.9bp.
Industry experts said that the central bank's borrowing of bonds and selling them in the secondary market will affect the supply and demand relationship in the secondary bond market, thereby affecting interest rate trends and preventing interest rates from deviating excessively from reasonable levels.
In addition, Mingming, chief economist of CITIC Securities, said that the central bank's move means that it may start selling treasury bonds in the open market in the near future. At a time when the 10-year treasury bond yield has fallen to a historical low, selling treasury bonds will help stabilize long-term bond interest rates and prevent interest rate risks.
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