China central bank surveys banks on bond buying – report

China’s central bank is surveying some banks on their activities in the bond market, according to Reuters sources.

It’s not clear why they were looking into activities but Chinese yields have plunged recently and 10s yield just 0.258%. The PBOC has warned of bubble risks. That’s running against a central bank that touted a shift to “appropriately loose” monetary policy last week. There was also a nod yesterday towards cutting interest rates “in a timely manner”.

The drop in yields is notable because it’s adding pressure on the yuan, which the read-out from the Work Conference said officials would: “maintain basic stability of yuan exchange-rate at reasonable and balanced level.”

The market is worried the yuan could be used in a US trade war.

This article was written by Adam Button at www.forexlive.com.