(Yicai) Dec. 18 -- The yield on China’s benchmark government bond steadied after the central bank summoned financial institutions involved in “aggressive trading” for a meeting this morning.

The yield on the 10-year treasury bond opened at 1.7439 percent today and climbed to 1.7860 percent in the afternoon. It had fallen to a record low earlier this week.

The People’s Bank of China has called on financial institutions involved in “aggressive trading” in the bond market to closely monitor their interest rate risk exposure and enhance the stability of their bond investments, the PBOC-backed Financial News reported today.

Those called in included certain banks, brokerages, insurance asset managers, wealth managers, funds, and trust companies. The PBOC emphasized the importance of adhering to the law and regulations, reiterating its zero tolerance for illegal and non-compliant behavior in the bond market.

Interest rate cuts and slowing economic growth have underpinned this month’s bullish interbank bond market, with surging prices sapping yields. The yield on the 10-year treasury bond slid below 2 percent on Dec. 2 and very nearly dipped below 1.7 percent yesterday.

The PBOC has reportedly investigated several financial institutions suspected of regulatory breaches involving lending accounts, disruptive pricing, benefit transfers, and weak internal controls. The bank is investigating potential violations and plans to maintain regular inspections in the future, per the reports.

The recent slide in bond yields has benefited from the "moderately loose” monetary policy signalled for next year, which has fueled market speculation about future easing, Liu Yu, chief economist at Huaxi Securities, was cited by Shanghai Securities News today as saying.

On Dec. 9, a meeting of China’s top leaders relaxed the country’s monetary policy stance for the first time in 14 years. The Political Bureau of the Communist Party of China Central Committee pledged to embrace a “moderately loose” policy in 2025, shifting from the “prudent” stance followed since 2011.

Jin Yi, a fixed-income analyst at Guohai Securities, noted that while there are no obvious short-term negative factors for the bond market, the low yields suggests limited room for further rapid price gains, though yields may continue to decline marginally due to market inertia.

Editor: Emmi Laine