(Yicai) March 27 -- The new pricing system for the Chinese central bank’s medium-term lending facility is unlikely to trigger a broad-based bond market recovery amid stronger-than-expected economic growth this quarter, according to analysts.

The People's Bank of China announced on March 24 that its MLF operations will switch to multiple bid pricing from unified bid pricing from this month to maintain ample liquidity in the banking system and better meet the different funding needs of financial institutions. That means qualified banks can pay different interest rates on the loans rather than one fixed rate.

The PBOC also said it would sell CNY450 billion (USD62 billion) of one-year MLF loans the next day, the first time that it had ever flagged the action in advance. According to Huatai Securities, this early disclosure was to enable financial institutions to manage liquidity more effectively, boost market confidence, and improve transparency in the PBOC's communication with the market.

Following the announcement, bond prices rallied, with yields tumbled 10 to 15 basis points, snapping a three-month correction.

Despite the rebound, institutional investors remain cautious, largely due to optimism over first-quarter economic data beating predictions. Stronger economic growth typically benefits equities and other risk assets while weighing on fixed-income securities such as bonds.

Major financial institutions expect China’s economy to have grown between 5 percent and 5.3 percent in the three months ending March 31. Morgan Stanley even raised its forecast for annual growth by 0.5 percentage point recently, with its China Chief Economist Xing Ziqiang telling Yicai that the upward revision was based on better-than-expected economic data at the start of the year and relatively strong investment momentum in new industries.

China’s economy performed well in January and February, with fixed-asset investment and consumption growth rebounding, said Wang Qiangsong, research head at Nanjing Bank Wealth Management. Regarding consumption, there are signs of an improvement in daily household spending, post-real estate cycle transactions, and the procurement of corporate office supplies, he added.

Moreover, industry insiders generally expect the central bank not to tighten liquidity further, and more traders have begun taking profits on recent bond gains.

Editor: Futura Costaglione