China's central bank has increased its injection of long-term liquidity into the financial system, a move widely seen as an effort to curb bond sell-offs and ensure adequate funding for an economy showing signs of weakness.

The People’s Bank of China (PBOC) provided a net liquidity injection of 600 billion yuan (approximately Rp1.36 quadrillion) through one-year medium-term lending facilities and three- and six-month reverse repos throughout the month. This marks the largest injection since January, according to Bloomberg data. The move pushed down the overnight money market rate and lifted bond futures.

This policy underscores Beijing’s determination to maintain stable funding conditions while facilitating the issuance of government bonds, following a 30-year bond auction where investors demanded the highest yields since December. It is also expected to help ease pressure on bond mutual funds and prevent prolonged losses as investors shift towards equities.

“PBOC will continue to conduct long-term liquidity injections to ensure smooth government bond issuance and support bank lending expansion,” said Wang Qing, Chief Macro Analyst at Golden Credit Rating Co. He added that this measure “provides market confidence that monetary policy remains growth-oriented.”

Nevertheless, the central bank refrained from aggressive easing measures such as cutting interest rates and instead pledged targeted support for the economy. Policymakers remain cautious about deploying stronger tools like lowering the reserve requirement ratio or purchasing government bonds amid concerns about deflation risks.

Furthermore, the imposition of taxes on bond interest income has dampened investor appetite for government securities. Still, the central bank has continued to inject short-term funding to stabilize the market.

Liquidity injections through MLF and reverse repos—PBOC’s two key policy tools following this year’s reforms—are seen as essential for maintaining ample funding to support growth. This is particularly important as the ongoing stock market rally could draw household deposits away from banks, adding liquidity pressures.

On Monday, China’s overnight repo rate fell seven basis points to 1.35%. Meanwhile, 30-year bond futures surged as much as 0.7%, the biggest gain since April.