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(Bloomberg) — China’s efforts to rein in a sizzling bond rally are bearing fruit, as once wild swings in the nation’s ultra-long sovereign notes have all but evaporated.

The yield on the 30-year government bond traded within one basis point every day this week, marking its smallest weekly movement since August, excluding holidays. The calm stood in contrast with a global sovereign debt rally spurred by bets on further easing after authorities in Canada and the euro zone cut interest rates. 

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What sets China apart are policymakers’ growing concern that a local bond bull run may lead to asset bubbles and financial instability in the event of a market reversal. Mixed signals on economic recovery and uncertainties over Beijing’s willingness to ease policy further also add to investor caution. 

China’s sovereign yields may stay range bound for a while, said Cary Yeung, head of Greater China debt at Pictet Asset Management. “There is still a tug-of-war between accommodative monetary policy, increased supply and the gradual recovery of the economy.”

Over the past week, traders were fixated on when or whether the People’s Bank of China may sell its bond holdings to stem a rally that had pushed benchmark yields close to a two-decade low. Conflicting official and private manufacturing sector readings also made it harder for investors to place directional bets. 

The next key catalyst for Chinese bonds is likely to be the central bank’s decision on its policy rate when 237 billion yuan ($32.7 billion) of loans come due in mid-June. 

The benchmark 10-year yield may rise as high as 2.35% from 2.3% now, if the PBOC refrains from a rate cut this month, according to Ming Ming, an economist at Citic Securities Co. The 30-year yield will likely stay above 2.5%, he added. 

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