China pumps $125bn into economy to calm rising bond yields

China has pumped almost $125bn into the market over the past fortnight in a bid to calm investors’ nerves.

The People’s Bank of China has injected 810bn yuan ($122.4bn) after ten-year sovereign bond yields hit multi-year highs, according to a CNBC report.

“Surging Chinese government bond yields hit the nerve of policymakers, so in order to further prevent a greater surge, they injected liquidity into the system to improve market sentiment,” Ken Cheung, a foreign exchange strategist at Japan’s Mizuho Bank, told the Canadian broadcaster.

Regulatory tightening

The bond rout followed fears of regulatory tightening from Beijing as bond yields hit 4% for the first time since 2014.

Rising bond yields push up the cost of government borrowing, increasing the size of its debts. They are also a sign of a lack of investor confidence in the economy.

“We read this as a sign that financial deleveraging will be a multi-year theme and that deepening financial reforms are under way,” analysts at fellow Japanese bank Nomura said in a statement.