China increases market liquidity to help stop the bond slump

China used liquidity instruments with different repayment periods to maintain an acceptable level of funds in its monetary system. It helped to save the government bonds from the biggest sale for six years. 

According to the People's Bank of China, the number of liquidity injections this month exceeded one trillion yuan.

These actions show that the market sentiment changed from Monday. At this time, there was the biggest sale of government bonds since 2016 after the introduction of new support measures and changes in the country's policy regarding the coronavirus.

By Tuesday, hopes that the state would loosen anti-COVID measures were gone as the leading Communist Party newspaper confirmed the government's intention to pursue a zero-COVID policy.

The profitability of 10-year government bonds decreased by two points to 2.82%. As per Bloomberg data, on Monday, the profitability increased to 2.84%.