PBOC suspends treasury bond purchases amid global bond selloff
PBOC seeking to defend falling yuan, analysts say
Analysts expect continued downtrend in bond yields

SHANGHAI, Jan 10 Reuters China39;s central bank said on Friday it has suspended treasury bond purchases, triggering a jump in yields and spurring speculation that the move was aimed at defending a falling currency.

The People39;s Bank of China PBOC cited a shortage of bonds in the market as the reason it was halting the purchases, which were part of its operations to ease monetary settings.

But the move coincides with a brutal selloff in other major bond markets around the world and suggests China39;s central bank is trying to ensure yields at home also rise in tandem, analysts say.

Yields, which move inversely to bond prices, jumped following the central bank39;s announcement.

China39;s 30year treasury yield climbed five basis points in early trade while the 10year yield rose four basis points. Both hit record lows recently. The yuan too rose slightly.

One of the key reasons for the depreciation of the yuan is the widened yield gap between China and the U.S., so the central bank is sending a signal to the market that the yield rate is unlikely to fall further, Ken Cheung, chief Asian FX strategist at Mizuho Bank.

The surprise announcement came just months after the PBOC started bond buying as part of measures to improve liquidity management. The central bank said in a statement it would resume bond…