May 8 (Reuters) - China's central bank said on Wednesday that it can either buy or sell treasury bonds in the secondary market depending on market conditions, as such trades can be used to manage liquidity.
The People's Bank of China's (PBOC) made the statement after Reuters sought comment on market talks that the bank had been gauging demand for long-dated treasuries from some state banks.
It also comes amid avid speculation that the PBOC will soon start treasuries trading - an unconventional tool in China - as the government prepares to ramp up bond issuance.
"The central bank's buying and selling of treasury bonds in the secondary market can be used as a liquidity management method and a reserve of monetary policy tools," the PBOC said in a statement to Reuters, reiterating a point it made in state media two weeks ago.
"In practice, the operation of buying and selling of treasury bonds will be two-way. The operation can either be purchase, or sale, depending on regulatory needs as well as the condition of market supply and demand."