China liquidity jitters may hit bond market

China’s government-bond investors will soon be looking for reassurance from the central bank that there’s plenty of cash in the financial system.

The country will see a “liquidity hole” of 2.8 trillion yuan ($400 billion) in January, in large part because people across the nation will withdraw cash for the Lunar New Year holiday, according to Guotai Junan Securities Co.

That means bond traders expect the central bank to unlock funds to avoid the liquidity-driven panic seen in October, when the benchmark 10-year yield spiked the most in six months.