China's PBOC injected a net 9.5 billion yuan through seven-day reverse repos on Tuesday and Wednesday, the most since late March, despite the banking system already appearing flush with liquidity and money-market rates hovering near three-year lows. The move surprised traders and signals policymakers' unusual tolerance for abundant cash, prioritising low funding costs and smooth government financing to support the economy.

The injection boosted confidence that the bond rally has further room to run. Futures on 10-year government debt rose for an eighth straight session, the longest winning streak since September 2024, while cash bonds edged higher. Yields on 30-year notes fell about 13 basis points this month to 2.22%. Overnight repo rates held around 1.2%, and one-month negotiable certificate of deposit yields dropped to their lowest since January 2023.

The liquidity boost comes ahead of Friday's launch of ultra-long special government bond sales. Authorities will offer 119 billion yuan of 20- and 30-year notes, with the 30-year tranche the largest on record, as part of a 1.3 trillion yuan plan announced in March. Proceeds will fund infrastructure and subsidies without widening the headline fiscal deficit.

Analysts see the rally continuing. Changjiang Securities said the advance may be only "halfway through," projecting the 30-year yield could drop to 2.15%. Guannan Zhou at Huachuang Securities noted the PBOC appears comfortable with rising leverage to ensure a benign environment for the upcoming issuance.