SHANGHAI, May 17 (Reuters) - Chinese long-dated treasury bonds are determined by growth and inflation expectations but also short-term factors so investors must be cautious and avoid speculation, central bank-affiliated Financial News said in a front-page article on Friday.
The finance ministry on Friday will start selling 1 trillion yuan ($138 billion) worth of special treasury bonds that the government hopes will help stimulate a flagging economy.
"In the long run, economic fundamentals continue to improve and long-term treasury bond yields will generally move in a reasonable range that match growth expectations," the newspaper reported citing unidentified financial industry sources.
However, long-term bonds are also sensitive to short-term factors so market participants "should pay attention to interest rate risk, invest prudently and rationally, and guard against loss that may result from overly short-term behaviour."
A stuttering recovery in the world's second-biggest economy has sent banks and fund managers to the safety of government bonds, driving a record-breaking rally that has pushed yields on 30-year bonds down as much as 40 basis points this year.
Citing sources, the newspaper said 2.5% to 3% would be a rational range for long-term bond yields, without identifying the tenor.
Ten-year treasury bonds currently yield roughly 2.3%, while the 20-year tenor yield around 2.7%.
The special treasury bonds will carry tenors of 20, 30 and 50 years, with issuance spread over the next six months.
Premier Li Qiang has urged officials to make good use of the bonds to support major national strategies and build security capability, state media reported this week.
The People's Bank of China has also suggested treasury bond trading as a means of managing liquidity. The bank can adjust supply and demand by buying and selling, thereby stabilising yields, the Financial News reported citing industry sources.
($1 = 7.2181 Chinese yuan renminbi) (Reporting by Shanghai newsroom; Editing by Christopher Cushing)
