Chinese sovereign bonds plunge after PBoC injects 14-Day Reverse Repos for the first time in over six months

The Chinese sovereign bonds plunged Wednesday after the People’s Bank of China injected 50 billion yuan cash into the money market for the first time over six months in the form of 14-Day Reverse Repos.

The yield on the benchmark 10-year bonds, which moves inversely to its price, increased 2-1/2 basis points to 2.779 percent, the super-long 30-year bond yield jumped 2-1/2 basis points to 3.315 percent and the yield on the short-term 3-year bonds climbed 1-1/2 basis points to 2.427 percent by 06:00 GMT.

The Chinese central bank injected 50 billion yuan (nearly 7.52 billion US dollar) in fourteen-day reverse repurchase agreements and 90 billion yuan liquidity in seven-day reverse repos, which is used for injecting cash on a regular basis to adjust money supply in the financial system.

It is worth remembering that the central bank used this instrument six months earlier on February 6, when the PBoC injected in a customarily higher amount of cash ahead of the Lunar New Year holiday.

Meanwhile, China sets the USD/CNY reference rate at 6.6420, 0.25 percent stronger than 6.6586 yesterday, the Shanghai Composite (SSEC) fell 0.17 percent to 3,084.34 and Shenzhen Composite (SZSE) Index rose 0.40 percent at 2,032.098 by 06:40 GMT.