(Bloomberg) -- After a four-day bond selloff in China that shocked at least one market player, the government took action and stepped in.
Chinese sovereign notes rose on Tuesday after the central bank boosted cash injections in the financial system and China Development Bank, a key so-called policy lender, downsized its debt issuance. A manufacturing gauge that signaled slower expansion also gave the bonds some much-needed support.
It was policy makers who had triggered the slide earlier this month thanks to comments renewing their resolve to scale back leverage in the economy. But with 10-year government bond yields surging to a three-year high and stocks slumping on Monday, the risk of contagion to the broader financial markets and economy grew.
Whether the sell-off resumes depends on how the state walks the tightrope between deleveraging and stabilization. With money markets facing the largest amount of maturing injections this week since February, the People's Bank of China will remain traders' fixation.
To contact the reporter on this story: Justina Lee in Hong Kong at jlee1489@bloomberg.net.
To contact the editors responsible for this story: Robin Ganguly at rganguly1@bloomberg.net, Christopher Anstey
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