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in august, the people's bank of china carried out open market treasury bond trading operations, with a net purchase of bonds worth 100 billion yuan throughout the month. what impact will this first-ever purchase of treasury bonds by the people's bank of china bring?

for the bond market, this move is conducive to maintaining financial stability. the market believes that the central bank's recent multiple statements on the sale and purchase of treasury bonds and long-term treasury bond yields are aimed at guiding long-term treasury bond yields to return to a reasonable range and reminding investors of the investment risks they may face.

according to the announcement of the central bank, the operation method of its treasury bond trading in august is "buy short-term bonds + sell long-term bonds".

zhang jun, chief economist of china galaxy securities, said that buying short-term government bonds is intended to inject base money, while selling long-term government bonds is intended to block possible long-term bond bubbles and maintain financial stability. "buying short and selling long" helps maintain the normal upward shape of the yield curve.

wen bin, chief economist of china minsheng bank, told china news service that the "buy short and sell long" operation reflects the central bank's intention to regulate the treasury bond yield curve and its risk control attitude towards long-term interest rates. it will help maintain a reasonable term spread of treasury bond interest rates and long-term interest rate levels to avoid excessive market speculation and the accumulation of potential financial risks.

"at present, the possibility of a sharp downward breakthrough in long-term bond market interest rates is low, and short-end products may be more popular due to their better liquidity and the allocation needs of non-bank institutions." wen bin said.

for monetary policy, the toolbox is further enriched. "the central bank's launch of treasury bond trading marks the entry of new monetary policy tools into the box." zhou maohua, a macro researcher at the financial markets department of everbright bank, said that the market has long expected the central bank to buy and sell treasury bonds. in the second quarter monetary policy implementation report, the central bank made it clear that it plans to introduce treasury bond trading in open market operations to enrich the means of issuing base money.

zhou maohua said that the central bank’s creation of treasury bond trading tools has adapted to changes in the liquidity market structure, enriched monetary policy tools, and can enhance the accuracy and effectiveness of the central bank’s regulation of base money and market liquidity.

"china's monetary policy still has normal operating space. the central bank's buying and selling of treasury bonds is a way to enrich the policy toolbox and increase the injection of base money." zhang jun believes that the central bank's timing of buying and selling treasury bonds in the open market is more flexible and covers a wider range of terms, which can serve as an effective supplement to other methods of injecting base money.

for macroeconomic regulation, policy coordination and cooperation have shown new ideas. pan gongsheng, governor of the people's bank of china, mentioned at the lujiazui forum held in june this year that the central bank is strengthening communication with the ministry of finance to jointly study and promote the implementation of gradually increasing the purchase and sale of treasury bonds in the central bank's open market operations. this process is overall gradual, and the pace of treasury bond issuance, maturity structure, and custody system also need to be studied and optimized simultaneously.

zhang jun said that the central bank's purchase and sale of treasury bonds is the intersection of monetary and fiscal synergy. the central bank's purchase and sale of treasury bonds can smooth out the liquidity shock that may be caused by the concentrated issuance of government bonds and avoid sharp fluctuations in fund prices.

the institute of finance of the chinese academy of social sciences also suggested in a previous report that in the context of the current challenges faced by the chinese economy such as insufficient effective demand, the debt ceiling should be appropriately raised according to the economic situation. that is, more fiscal spending and more central bank purchases should be made to give full play to the leverage effect of government bond funds.

zhang jun believes that with the federal reserve's likely rate cut in september and the easing of external pressure, this month or the next month may be an important time for china to introduce incremental fiscal tools. by then, the central bank may increase its open market purchase and sale of treasury bonds and work together