On June 3, Jin10 reported that the People's Bank of China (PBOC) released data on liquidity operations for May 2026, indicating a net injection of 50 billion yuan through open market government bond transactions. According to Jin10, Wang Qing, Chief Macro Analyst at Orient Jincheng, noted that this trend is influenced by multiple factors. The current market liquidity is relatively abundant, reducing the need for the central bank to inject long-term liquidity through large-scale government bond transactions. This reflects the PBOC's intention to guide market interest rates to operate smoothly around policy rates through flexible open market operations.
Industry insiders have highlighted that the PBOC's use of various liquidity tools, including open market government bond transactions, has become more flexible recently. While maintaining the current monetary policy direction, there is a shift in rhythm from 'withdraw first, then inject' to 'peak shaving and valley filling' for flexible regulation.
Looking ahead, Wang Qing expects the recent downward fluctuation in the 10-year government bond yield to be influenced by several factors, including international developments, the slowing rise in international oil prices, cooling domestic inflation expectations, and fluctuations in April's macroeconomic data. This may also explain the relatively low level of net government bond transactions in May.
"Looking forward, if the 10-year government bond yield falls below 1.7%, there is a possibility of further reducing the net scale of government bond transactions, or even suspending open market government bond transactions again," Wang Qing added.