China central bank local branches survey some lenders on bond investments, sources say

SHANGHAI, Dec 3 (Reuters) - Some local branches of the People's Bank of China have recently surveyed banks about their bond investment activities, including whether lenders have been selling older issues to boost returns, and whether interest-rate risks are building, three sources said on Wednesday.

The survey also asked about the size and mix of banks' bond investments and how returns from those holdings affect banks' net profits, the sources told Reuters.

"This round of survey focuses on three areas: (bond investments') accounting buckets, profits and risks," a source familiar with the matter said.

All three sources declined to be named as they are not authorised to speak to media.

The PBOC did not immediately respond to Reuters' request for comment.

Industry participants said some banks sold bonds designated as held to maturity from amortised-cost accounts ahead of year-end to lock in profits, though such transactions are rare among listed lenders due to stricter accounting rules.

China's bond market has been softer this year after a multi-year rally. Benchmark 10-year government bond yields have risen nearly 20 basis points in the second half, leaving many newly bought sovereign bonds showing paper losses. Bond prices fall when yields rise.

(Reporting by Reuters Staff; Editing by Lincoln Feast)