China regulates the bond market based on market principles, says state media By Reuters

SHANGHAI (Reuters) – China’s financial regulators are approaching bond market supervision based on market principles and from macroprudential and compliance perspectives, state media said on Saturday, rejecting claims of market intervention.

In recent weeks, Chinese authorities have halted a long and frantic rally in the world’s second-largest bond market and reduced trading volume with repeated warnings about the risks of reckless buying.

Earlier this month, a financial market association under the People’s Bank of China, the central bank, said it would investigate four rural commercial banks for suspected treasury market manipulation.

The PBOC-backed Financial News on Saturday rejected claims by market participants that the central bank would intervene in the market through administrative measures.

“As long as institutions trade in accordance with market principles and the rule of law, regulators will not intervene directly,” the paper quoted an industry source as saying.

It said claims of market intervention “refresh the waters”, citing people familiar with the matter.

The paper warned of the risk of a “stampede” in the bond market due to unilateral consensus behaviour.