Chinese yuan Photo:VCG

The National Association of Financial Market Institutional Investors (NAFMII), under the auspices of China's central bank, announced on Wednesday that it will conduct an investigation into four rural commercial banks over suspected manipulation in the treasury bond trading market.

The move came as the authorities are taking actions to water down the treasury market frenzy and mitigate the associated financial risks.

The four banks were named as Changshu Rural Commercial Bank, Jiang'nan Rural Commercial Bank, Kunshan Rural Commercial Bank and Jiangsu Suzhou Rural Commercial Bank Co - all based in East China's Jiangsu Province, according to the statement.

The regulator said that these banks are "suspected of manipulating prices and transferring benefits in the secondary market trading of treasury bonds."

This came as part of the authorities' efforts to cool down the bond market rally recently seen in China, analysts said.

Earlier in July, yields on 30-year treasury bonds in China once fell below 2.5 percent, and 10-year yields dropped below 2.3 percent, attracting significant market attention.

Following China's long-term treasury bond yields, the People's Bank of China (PBC), the central bank, recently announced plans to execute treasury bond borrowing operations with the primary dealers in the open market, a move analysts said will increase treasury bond yields and diversify China's monetary policy toolkit.

Pan Gongsheng, governor of the PBC, in June at the 2024 Lujiazui Forum emphasized the importance of maintaining a normal upward-sloping yield curve to preserve market investment incentives.

Bond issuance is an important part of this year's proactive fiscal agenda, which will help boost market confidence and expectations, and better support economic development, according to analysts.

China will replenish 35 billion yuan ($4.9 billion) to this year's third batch of ultra-long special treasury bonds on Friday, the Ministry of Finance said on August 2.

The bonds will be issued at the Beijing Stock Exchange with a term of 50 years and an interest rate matching that of the previous issuance of the third batch of such bonds at 2.53 percent, it said.

Global Times