China's central bank warns mutual funds against feeding bond frenzy, sources say

SHANGHAI, Jan 4 (Reuters): China's central bank summoned some fund managers on Friday to warn them against chasing a fervid bond rally, two sources said, amid worries that a bubble in bonds might undercut Beijing's efforts to revive growth and manage a depreciating currency.

Friday's meeting is the latest in a string of warnings the People's Bank of China has issued to banks and investment managers since last year.

One of the sources said such meetings between the PBOC and institutional investors have become more regular recently, occurring several times a week, as investors seek succour in the safety of bonds and bet on weakness in stocks.

The source, who works at a major mutual fund house, said that only fund managers with an "extremely passive approach toward bond investment" were safe from such summons, with the rest of the industry in the PBOC's crosshairs.

Reuters could not gain further details about Friday's meeting. The PBOC did not respond to a request for comment.

The sources declined to be identified as they were not authorised to speak to the media.