After the announcement, the yields on government bonds with various maturities saw a significant rise.

Among them, the yield on the active 10-year government bond "24 Interest-bearing Government Bond 04" once climbed above 2.28%, increasing by more than 5 basis points (BP).

Long-term government bond yields hit a historical low, prompting the People's Bank of China (hereinafter referred to as "the central bank") to stabilize the bond market.

At noon on July 1, the central bank announced, "In order to maintain the stable operation of the bond market, based on a prudent observation and assessment of the current market situation, the People's Bank of China has decided to carry out government bond lending operations with some primary dealers in the open market business in the near future."

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"This move by the central bank implies that there may be government bond selling operations in the open market in the near future," said Ming Ming, the chief economist of CITIC Securities, "As the yield on the 10-year government bond has fallen to a historical low, selling government bonds is conducive to stabilizing long-term bond rates and preventing interest rate risks."

After the announcement, government bond futures plummeted across the board, with the 30-year main contract falling by 0.6%, the 10-year main contract falling by 0.15%, and the 5-year and 2-year main contracts falling by 0.06% and 0.02%, respectively.

In the spot market, the yields on government bonds with various maturities saw a significant rise.

Among them, the yield on the active 10-year government bond "24 Interest-bearing Government Bond 04" once climbed above 2.28%, increasing by more than 5 BP; the yield on the active 30-year government bond "23 Interest-bearing Government Bond 23" once rose above 2.48%, increasing by more than 6 BP.

"From historical experience, if the market's reaction to expected guidance is too indifferent, the central bank is more likely to increase the intensity of expected guidance and start using other policy tools, ultimately achieving a mutual verification and coordination between the central bank's policy operations and external communication, maintaining the 'consistency of words and deeds' in expected guidance," said Zhang Xu, the chief fixed-income analyst at Everbright Securities.

It is worth noting that after a rapid rise, the yields on several active bonds have fallen back.

Among them, "24 Interest-bearing Government Bond 04" once erased all the gains, and the daily increase in "23 Interest-bearing Government Bond 23" once fell back to within 2 BP.

Many market participants believe that this fluctuation shows that some institutions are taking the opportunity to bottom-fish.

"It is estimated that interest rates will rise today and tomorrow, and then the market will observe the details of the central bank's operations," said an asset management person, believing that the market will continue to test the central bank's determination to act.

After the opening on the morning of July 1, the yields on the 10-year and 30-year government bonds both fell to historical lows.

East Money Choice data shows that the yield on the active 10-year government bond "24 Interest-bearing Government Bond 04" once fell to 2.2100% during the trading day, hitting a historical low; the yield on the active 30-year government bond "23 Interest-bearing Government Bond 23" once fell to 2.4060% during the trading day, also hitting a historical low.

At 13:10 noon, the central bank's Monetary Policy Department issued a public market business announcement, declaring a decision to carry out government bond lending operations with some primary dealers in the public market business in the near future, and the market trend immediately reversed.

The prices of government bond futures fell across the board.

Among them, the 30-year government bond futures main contract fell by more than 1% during the trading day, the 10-year government bond futures main contract fell by more than 0.4%, and the 5-year government bond futures main contract fell by more than 0.2%.

In terms of spot, the yields on "24 Interest-bearing Government Bond 04" and "23 Interest-bearing Government Bond 23" once rose by more than 5 and 6 BP, respectively, during the trading day.

Bond yields move in the opposite direction to bond prices.

An increase in yields means a decrease in bond prices, that is, investors are selling the corresponding bonds, and vice versa.

"After borrowing bonds, the central bank has more 'chips' when conducting monetary policy operations, and it may choose to sell the corresponding bonds in the secondary market," said Zhang Xu, after the aforementioned announcement was posted online, the yield on government bonds rose significantly, and government bond futures fell rapidly.

"This will affect the supply and demand relationship in the secondary bond market, and may affect the trend of interest rates, thereby avoiding excessive deviation of medium and long-term government bond rates from a reasonable level," said Dong Ximiao, the chief researcher at China United Network Communications, "The central bank reminds financial institutions and individual investors to pay attention to the term mismatch and interest rate risks that may arise from investing in medium and long-term bonds through this move.

Investors should make investment decisions based on a reasonable expectation of the economic fundamentals, combined with their own asset-liability situations, and pay close attention to interest rate risks."

This year, driven by factors such as asset scarcity, the yield on long-term government bonds has continued to fall, with the yield on the 10-year and 30-year government bonds falling by more than 30 BP, touching a historical low.

In response, the central bank itself and through mainstream media such as the Financial Times has repeatedly warned that excessively low yields on long-term government bonds may trigger interest rate risks.

On June 18, the governor of the central bank, Pan Gongsheng, reminded in a public speech, "At present, especially pay attention to the term mismatch and interest rate risks of a large number of non-bank entities holding medium and long-term bonds."

In the central bank's monetary policy committee's second quarter meeting communique released on June 28, the central bank continued the stance of the first quarter meeting, saying, "In the process of economic recovery, it is also necessary to pay attention to the changes in long-term yields."

Against this background, the yield on long-term bonds has once again fallen to a lower level.

For example, on the previous trading day (June 28), the yield on the 10-year and 30-year government bonds fell to 2.21% and 2.43%, respectively.

"The central bank's borrowing of government bonds this time is to maintain the guidance of expectations in the previous period and achieve 'consistency of words and deeds'," said Zhang Xu, if the market's reaction to the guidance of expectations is too indifferent, the central bank is more likely to increase the intensity of the guidance of expectations, and start using other policy tools, ultimately achieving a mutual verification and coordination between the central bank's policy operations and external communication, maintaining the 'consistency of words and deeds' in the guidance of expectations.

It is worth noting that after the rapid rise in the afternoon of July 1, the yield on government bonds fell back after rising, maintaining a fluctuating trend at a high level.

Taking "23 Interest-bearing Government Bond 23" as an example, after touching the daily high of 2.485%, the yield on this bond once fell back to 2.45%, and the daily increase shrank to within 3 BP.

As of 4 p.m., the yield on this bond was 2.47%, with a daily increase of more than 4.5 BP.

In response, a private equity investment manager said that the logic of asset scarcity is still there, if there is nowhere for funds to go, after the fluctuation, it is just a change in the price position to continue to buy bonds.

"The yield may have to go back."

The aforementioned asset management person believes that there are flaws in the logic of asset scarcity.

It is expected that the yield will rise in the next two days, and the market will observe the details of the central bank's operations and then make plans.

"Investors in the market who are long-term and ultra-long-term interest rate products generally believe that the central bank does not have enough tools to guide the corresponding term yields to rise.

We believe that compared with the use of specific tools, the attitude of the regulator is more critical," Zhang Xu emphasized that the central bank has not explicitly carried out only one government bond borrowing operation, nor has it ever explicitly stated that it will not use other tools to guide the yield on long-term government bonds to rise.

If the trend of bond yields in the next period is not satisfactory to the monetary authorities, it is also reasonable to borrow and sell government bonds again and take other policy tools.

Based on the above logic, Zhang Xu judged that it is a high probability event for the yield on the 10-year government bond to touch 2.5% in the next one or two quarters.

Previously, the media under the central bank had stated that 2.5%-3% is a reasonable range for the yield on long-term government bonds.

In addition, Zhang Xu reminded that in the bull market phase, investors tend to unconsciously strengthen the importance of bullish factors, and often do not see bearish factors.

Once the market adjusts, investors will overemphasize bearish factors.

"The current bond market is not completely the same as before the adjustment in the fourth quarter of 2022, but there are also many similarities.

Perhaps at this time, investors need to take precautions against the price fluctuation risks of bond assets and protect their 'money bags'."