Commentary: Will China’s Central Bank Resume Government Bond Buying
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A recent meeting of a joint working group of the Ministry of Finance and the People’s Bank of China has once again touched on the subject of government bond trading, sparking market hopes for the central bank to resume its purchases. The PBOC has now paused bond trading for eight consecutive months. How should we assess the likelihood of this tool being restarted, and could it be a turning point for the bond market?
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What Happened When
- June 2023：
- At the Lujiazui Forum, Governor Pan Gongsheng publicly mentioned the government bond trading tool and outlined plans to study its implementation.
- End of March 2024：
- Release of 'Excerpts from Discourses on Financial Work' mentioning the need to enrich the monetary policy toolbox and gradually increase the trading of government bonds in open market operations.
- April 2024：
- Discussion about the central bank buying and selling government bonds began.
- August 2024：
- PBOC officially launched government bond trading operations, including buying short-term and selling long-term bonds.
- August 2024 - December 2024：
- PBOC primarily bought short-term government bonds, continuing net purchases until January 2025.
- October 2024：
- Joint working group’s meeting used phrasing indicating more urgency about government bond trading tool than in 2025.
- Q4 2024：
- PBOC monetary policy report confirms that since August 2024, government bond trading gradually added to open market operations.
- January 2025：
- PBOC decided to temporarily suspend its government bond trading operations to curb continued decline in long-term bond yields.
- Early 2025：
- Yield on 10-year government bonds fell to historic low below 1.6%.
- June 2025 - July 2025：
- Major banks resumed net buying of short-term government bonds.
- As of July 2025：
- PBOC's 'claims on government' asset item on its balance sheet had decreased by 590.8 billion yuan from the end of 2024.
- August 2025：
- Stock market indices broke key levels, further accelerating ascent and prompting fund reallocations away from bonds.
- September 5, 2025：
- Net supply of government bonds in 2025 reached 4.96 trillion yuan; another 1.7 trillion yuan expected for remainder of the year.
- September 2025：
- 233 billion yuan of special government bonds expected to be issued.
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