EVERYTHING IS GOING SWIMMINGLY (BEIJING EDITION): The Disconcerting Signal Behind China’s Epic Bond Rally.

In recent weeks, bond traders have been piling into the perceived safety of Chinese government bonds, driving an epic buying spree that has pushed yields on the benchmark 10-year note, which move inversely to prices, to record lows.

The rally has elicited an unusual response from China’s central bank, which is responsible for managing the state treasury and maintaining financial stability: Stop buying these notes.

The tug of war has nonetheless persisted, turning an uncomfortable spotlight on some of the ingredients that economists say are fueling demand for the bonds: waning confidence in Chinese economic growth, and a lack of attractive investment options in a country where real-estate prices and stocks are both taking a beating.

The People’s Bank of China says it is worried that a sudden reversal of the bond rally could incur steep losses for smaller lenders snapping up the notes, a kind of Chinese rerun of last year’s Silicon Valley Bank debacle in the U.S.

But economists say those concerns are overblown, and suspect the real reason for authorities’ displeasure is the message underpinning the fervor for the government bonds: a lack of confidence in China’s economic growth.

Prediction is difficult, especially about the future, but China seems more and more likely to be heading towards a ’90s Japan-style “lost decade.”