Clearing data suggests PBOC buying government debt – Bloomberg

According to the latest report carried by Bloomberg on Thursday, the clearing data prompted speculations that the People’s Bank of China (PBOC) may have resorted to government bond-buying from domestic banks last month.

Key takeaways

“Sovereign bonds held by “other” investors -- a category that includes central banks and clearing houses -- rose by 196.5 billion yuan to 1.78 trillion yuan ($256 billion) last month, according to data released by China Central Depository & Clearing Co. last week.

Policymakers have frequently said in the past they do not intend to enact the kind of bond-market purchases seen in developed markets and have restricted stimulus measures throughout the coronavirus crisis to moderate trimming of market interest rates and a more generous liquidity policy. But they have flagged a willingness to support the government’s fiscal policy.

The PBOC is forbidden by the nation’s central bank law from purchasing government debt in the primary market.”

Market reaction

The above report has little to no impact on the Chinese yuan, as USD/CNY trades flat at 6.9375 so far this Thursday.