Volatility will continue in the near term as the central bank repeatedly tweaks policy to adjust to changes in the economyTighter liquidity in the financial system may also be adding to the volatility, says Linan Liu, greater China macro strategist at Deutsche Bank AG.CHINA'S bond traders are throwing away the script this year as the central bank repeatedly tweaks policy to keep up with shifts in the economy.
One person at a commercial bank, who did not want to be named commenting on the market, said the swings have suddenly rendered her five-year trading experience useless. Tighter liquidity in the financial system may also be adding to the volatility, Deutsche Bank's Ms Liu said. Interbank rates tend to climb when lenders face seasonal demands such as tax payments.That was the case when the overnight repo rate surged to a four-year high of 3 per cent in mid-April as banks hoarded cash for that purpose, then tumbled to a three-year low within weeks.
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