Institutions fined big as China’s bond yields plunge, reflecting resolve of central bank

China’s central bank has imposed heavy fines on three financial institutions for bond-trading irregularities – the first of such punitive actions after it warned about plunging government bond yields from May.

In circulars released on its website on Monday, the People’s Bank of China said that the institutions – Shanghai East Asia Futures, Hunan Xupu Rural Commercial Bank and Tianjin Xintang Money Brokerage – were involved in misconduct designed to bypass regulatory and internal control requirements.

Three institutions were fined 36.07 million yuan (US$4.94 million), 13.1 million yuan and 11.03 million yuan, respectively. Meanwhile, 13 employees involved in these cases were penalised a total of 2.53 million yuan, while illegal gains of 8.57 million yuan from East Asia Futures were confiscated.

Amid declining returns from traditional assets such as stocks and real estate, investors are increasingly turning to low-risk options, such as government bonds, to diversify their portfolios.

Aggressive trading drove China’s 10-year bond yield down to an all-time low of 1.6981 per cent last week, down from 2.0253 per cent at the end of November. It stood at 1.7136 per cent as of Monday.

Meanwhile, the 30-year yield reached 1.955 per cent on Monday, down from 2.16 per cent earlier this month.