China’s benchmark 10-year treasury futures tumbled as much as 0.38% to hit a low of 101.515 before closing 0.15% down at 101.746. The 30-year treasury futures tumbled as much as 0.58% before closing 0.22% down. The yield on the 10-year government bond in the interbank market rose by as much as 2 basis point to 2.66%.
A state think tank researcher said that China can avoid a “balance sheet recession” if authorities take decisive actions to boost government borrowing and spending to stimulate the weakening economic recovery.
The Chinese government still has ample space to leverage up in part because it owns massive state assets, Liu Lei, a researcher at the National Institution for Finance and Development, said in an interview. Some analysts see the comments as a signal that the Chinese government may issue special treasury bonds.
In addition, the PBOC drained a net 219 billion yuan liquidity via open market operation on Tuesday.
