Govt bond yields fall most in one month on stimulus bets

China's 10-year government bonds rose, with the yield falling the most in a month, on speculation the central bank will add more funds to the financial system to bolster economic growth.

The People's Bank of China will probably provide about 200 billion yuan ($32.7 billion) to some national and regional lenders, a government official familiar with the matter said on Friday, asking not to be identified because there hasn't been an official announcement. The monetary authority has already injected cash, giving 100 billion yuan to each of the nation's five biggest banks last month.

The yield on the notes due in September 2024 declined 10 basis points to 3.80 percent in morning trade on Monday in Shanghai, according to the National Interbank Funding Center. That was the biggest drop for a benchmark 10-year security since Sept 19, ChinaBond data show.

"The central bank has sent a clear signal that it will maintain ample liquidity," said Deng Haiqing, a Beijing-based analyst at CITIC Securities Co. "This will further help the sovereign notes."

The PBOC reduced the interest rate paid to lenders at 14-day repo operations to 3.4 percent on Oct 14 from 3.5 percent, the second such move in a month.

Share subscriptions to initial public offerings on Thursday and Friday may freeze up more than 1 trillion yuan, Ping An Securities Co estimated in a report on Sunday written by analysts including Shi Lei. Lenders need to park corporate tax payments at the central bank in the month after the quarter-end, which often tightens cash supply in the interbank market.

"The market is facing new share subscriptions later this week, and banks will need to pay tax, so the liquidity injection is a targeted loosening by the PBOC," said Beijing-based Shi, head of fixed-income research at Ping An Securities.

The seven-day repo rate, a gauge of interbank funding availability, dropped nine basis points, or 0.09 percentage point, to 2.95 percent, according to a daily fixing released by the National Interbank Funding Center.

The central bank gauged demand for 14-and 28-day repo contracts on Monday and also asked lenders to submit orders for seven-and 14-day reverse repos and 91-day bills, according to a trader at a primary dealer required to bid at the auctions.

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