China Central Bank Uses Hedge Fund Tactic to Tame Bond Bulls.

China's central bank, the People's Bank of China (PBOC), is planning to sell government bonds in order to prevent a bubble from forming in the country's debt market. This move is a departure from the PBOC's previous stance of avoiding quantitative easing. The PBOC aims to guide long-term yields higher as bond prices rally to record levels. The decision to sell bonds is driven by the complex challenges facing China's economy, including a property slump, deflation, and a lack of viable investment options for savers. The PBOC's strategy is to borrow Treasury bonds from primary dealers for open-market operations, allowing it to sell bonds and raise yields. However, the success of this approach depends on various factors, including structural reforms and policy support. [Extracted from the article]