Emergency measures do not provide a backstop: PBOC creates a new tool to stabilize the bond market, promptly easing liquidity shocks and breaking the redemption-selloff negative feedback loop.

Bond market stabilization gains another tool! The People's Bank of China announced on October 26 the establishment of a Bond Market Non-Bank Large-Value Redemption Swap Facility (BNSF). Authoritative experts stated that BNSF will prevent the bond market from falling into a negative redemption-selloff loop. Its mechanism design continues the "securities-for-securities" model of the "Securities, Funds, and Insurance Companies Swap Facility," and China will thereby build an emergency liquidity support mechanism for non-bank institutions covering both the stock and bond markets. The use of BNSF will strictly uphold market discipline and rigorously guard against "bailout illusion" and moral hazard.