China Starts Stress Testing Banks to Avoid Stampede Out of Bonds
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(Bloomberg) — China has initiated stress tests with financial institutions on their bond investments, to make sure they can handle any market volatility should a record-breaking rally reverse, according to state-run media.
The People’s Bank of China (PBOC) has made a gradual start to the tests recently, wary that a bull run might lead to one-sided bets in long-term government bonds, according to a front-page report by Financial News. Its intention may not necessarily be to significantly push yields higher, the central bank-backed newspaper said citing an unidentified source.
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- China is conducting stress tests on financial institutions' bond investments to gauge their response to potential market volatility, initiated by the People's Bank of China.
- The tests aim to ensure that banks can manage significant drops in bond prices and avoid a liquidity crisis if yields rise sharply.
- Authorities want to see banks' responses to sudden yield surges of 10, 20, or 50 basis points, while maintaining supportive monetary policies.
- Recently：
- The People’s Bank of China started gradual stress tests on financial institutions' bond investments.
- 2024-08-24：
- An interview with PBOC Governor Pan Gongsheng aired on China Central Television, where he discussed financial risks and monetary policy stance.
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