China’s Bond Market Oversight

SHANGHAI (Reuters) – China’s financial regulators approach bond market oversight based on market principles and macro-prudential and compliance perspectives, state media reported on Saturday, rejecting claims of market intervention.

Recently, Chinese authorities have halted a long rally in the world’s second-largest bond market, significantly reducing trading volume and issuing warnings about the risks of reckless buying.

Earlier this month, a financial market association under the People’s Bank of China (PBOC), the central bank, stated it would investigate four rural commercial banks over suspected manipulation in the treasuries market.

The PBOC-backed Financial News responded to claims by some market participants that the central bank was intervening through administrative measures.

According to an industry source cited by the newspaper, “As long as institutions trade in accordance with market principles and rule of law, the regulators will not directly intervene.”

The newspaper warned that claims of market intervention were “muddying the waters”, citing sources familiar with the matter, and cautioned against the risk of a “stampede” in the bond market due to unilateral consensus behavior.