June 26 (Bloomberg) -- China's 30-year government bonds fell the most this month on speculation the central bank will raise interest rates as early as this month to cool inflation.

Bond dealers expressed concern price increases won't slow during a quarterly meeting called by the Finance Ministry yesterday to discuss Treasury debt sales, said Xu Hanfei, a fixed-income analyst with Industrial Bank Co. China raised gasoline and diesel prices as much as 17 percent on June 20.

``The market is pessimistic and big investors started to dump long-term debt to limit losses,'' Shanghai-based Xu said. ``The central bank may start to move as soon as this month.''

The yield on the 4.5 percent 30-year bonds advanced 14 basis points from the price compiled by Bloomberg yesterday to 4.91 percent as of 5 p.m. in Shanghai, according to the China Interbank Bond Market. The price of the security fell 2.12 per 100 yuan face amount to 93.61.

Xu raised his inflation forecast by 1 percentage point after the energy price rise to 7.5 percent this year, compared with the government's target of 4.8 percent. Consumer prices advanced 7.7 percent in May, down from April's 8.5 percent pace, near the fastest in almost 12 years.

The People's Bank of China may also sell special sterilization bills to lenders as part of efforts to curb loan growth, said He Xiuhong, a bond analyst at GF Securities Co. in Guangzhou, the nation's third-largest brokerage by revenue.

To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net

Last Updated: June 26, 2008 05:58 EDT