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The
People's Bank of China, which has pledged to add treasury bond
trading to its monetary policy toolkit, has issued repeated
warnings against plummeting yields in long-dated government
bonds, but has failed to reverse the trend.
"At present, it is particularly important to pay attention to
the maturity mismatch and interest rate risk of the large
holdings of medium- and long-term bonds by some non-bank
financial institutions," PBOC Governor Pan Gongsheng told the
Lujiazui Forum in Shanghai.
Pan's latest comments come as pressure is growing on the central
bank to back statements with action.
In an apparent signal that the PBOC won't stay sidelined for
much longer, the governor said that China must address the kind
of risks that led to the collapse of the Silicon Valley Bank in
the United States last year once the market turned.
"The risk event of the Silicon Valley Bank in the United States
has told us that central banks need to observe and assess the
situation of financial markets from a macro-prudential
perspective, so as to correct and block the accumulation of
financial market risks in a timely manner," Pan said.
He added the central bank will work on "maintaining a normal
upward-sloping yield curve and to keep the market's positive
incentives for investments."
China's 30-year government bond yield edged up 1 basis point
after Pan's comments, but continued trading below the
closely-watched 2.5%.
Separately, the governor also told the forum that China will
flexibly use various monetary policy tools including interest
rates and reserve requirement ratios.
Both Pan and Zhu Hexin, head of the State Administration of
Foreign Exchange (SAFE), reiterated at the forum that China will
resolutely prevent the yuan exchange rate from overshooting.
China's yuan has lost about 2.2% against a resurgent U.S. dollar
so far this year, pressured by its relative low yields versus
other currencies. [CNY/]
(Reporting by Shanghai and Beijing Newsroom; Editing by
Christian Schmollinger and Shri Navaratnam)
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