SHANGHAI, June 27 Reuters China39;s treasury futures leapt to fresh highs on Thursday, while longdated yields skirted record lows, as investors continued to plough money into bonds, shrugging off repeated warnings about risk from the central bank.

Assets of Chinese bond mutual funds ballooned to a record 6.5 trillion yuan 894.3 billion in May, up 40 from a year earlier, official data showed. The rise reflects how lower deposit rates are steering savings into fixed income products amid stock market volatility.

The bond bull run in China mirrors investor pessimism towards an economy grappling with a real estate crisis, local government debt troubles and heightened geopolitical risks.

Markets are broadly in agreement that China39;s interest rates will trend lower, Su Gang, chief investment officer at China Pacific Insurance Group, told a conference this week.

We39;re in the midst of a long cycle that we39;ve never experienced before …. and the market lacks confidence.

The continuous decline in yields, which move inversely to bond prices, is testing the resolve of the People39;s Bank of China PBOC to cool feverish bond buying it deems could endanger financial stability.

Despite these warnings, investors have continued to drive up bond prices this week.

China39;s 30year treasury futures for September delivery rose roughly 0.3 on Thursday morning to a record high, while 10year bond futures also hit new heights.

Meanwhile, China39;s 10year treasury yield has dropped…