China’s bond market is rattled as central bank squares off with bond bulls [Video]

China’s bond market, the world’s second largest, is on edge following a turbulent week in which the central bank started intervening heavily to stem a plunge in yields even as the economy is struggling.

But die-hard investors say the bull market in government bonds still has legs, citing China’s wobbly economy, deflationary pressures and low investor appetite for riskier assets.

“We remain actively bullish,” said a bond fund manager, undeterred by unprecedented government moves to cool the sizzling treasury market and arrest a plunge in yields, which move inversely to prices.

“We don’t see a rosy economic picture … and we’re under peer pressure to generate returns,” said the Beijing-based manager who asked to be anonymous due to sensitivity of the topic.

Even those who have turned bearish appear half-hearted. Treasury futures investor Wang Hongfei …