Securities market|Weak economic growth and the weak development of the stock market have increased the demand for bonds.
of China plans to issue billions of dollars worth of bonds by the end of the year could trigger a price bubble, sources close to China’s central bank warn newspaper for the Financial Times.
The reason for the warning is a significant increase in demand for Chinese government bonds. As a result, the prices of ten-year government bonds have risen and the yield rate has fallen below 2.2 percent. Because of this, China’s central bank has already warned that a sudden turn in the bond market could threaten financial stability, the Financial Times writes.
The official ones according to data and state media, by July, the government had still not issued a little more than half of the planned quota for local government and central government’s particularly long-term funds for the current year. That means a total of 2,680 billion yuan, or 376 billion dollars.
“When these government and municipal bonds grow explosively at the end of the year due to budget requirements, they amount to hundreds of billions. The potential for a significant rate reversal is very high,” one of the sources close to the central bank told the Financial Times.
of China the slowdown in economic growth has caused bond issuance to increase in recent years.
Due to the dim outlook of the economy and the weak development of the stock market, investors have pushed capital into bonds. Because of this, regulators fear that price bubbles may appear in the market.
According to the Financial Times, the central bank has announced that it is particularly concerned about investment funds that have put capital into long-term government bonds. The risks may materialize if interest rates reverse.
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