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China halts bond buying to defend yuan as economic gloom worsens
The Straits Times
|January 11, 2024
China's central bank said it will suspend buying government bonds, its latest attempt to temper investor bets on weak economic growth that have undermined the currency and sapped confidence among businesses and consumers.
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The People's Bank of China (PBOC) will suspend purchases of sovereign debt in January as the supply of the bonds has fallen short of demand, it said in a statement on Jan 10. The central bank will pick a time to resume buying depending on market conditions, it added.
Benchmark bond yields had slumped to an all-time low, driven by bets on aggressive policy easing to reignite a sluggish economy and demand for haven assets.
Investors have turned to bonds amid a prolonged property crisis, weak consumption and concerns over deflation. China's currency has fallen towards a record low offshore.
The move reflects "the authorities' discomfort with plummeting government bond yields and increasing yuan depreciation pressure", said Mr Ken Cheung, chief Asian foreign-exchange strategist at Mizuho Bank.
This story is from the January 11, 2024 edition of The Straits Times.
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