Economics

China Bond Traders Boost Leverage With PBOC Watching Closely

Turnover of overnight repo surges to new record of 66.1t yuan
Authorities drained 300b yuan of cash in August amid low rates

BEIJING, CHINA - 2017/05/13: A person rides a bike past the PBoC. To offer a long-time and sustainable financial support for the \'One belt One road\' initiative, China\'s central bank (PBoC) and several countries along have signed a currency swap agreement and made breakthrough in RMB settlement and clearing arrangements when trade and investment. (Photo by Zhang Peng/LightRocket via Getty Images)Photographer: Zhang Peng/Lightrocket/Getty Images

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By Tian Chen

September 10, 2018 at 4:00 PM UTC

Updated on

September 11, 2018 at 8:42 AM UTC

This article is for subscribers only.

Chinese bond traders ramped up their leverage to a record high in August, and that could be catching the central bank’s attention.

The turnover of overnight repurchase contracts, a tool traders use to seek financing to fund their bond purchases, increased for a second straight month to hit 66.1 trillion yuan ($9.6 trillion), official data showed. In August, the People’s Bank of China conducted repo agreements -- an instrument that hadn’t been used in about three years -- to mop up about 300 billion yuan of liquidity from the banking system, according to people familiar with the matter.