Institutions snapping up Chinese treasury bonds are shorting the economy, state media says

SHANGHAI, July 13 (Reuters) - Financial institutions snapping up Chinese government bonds are basically shorting the Chinese economy, China's central bank-backed Financial News reported on Saturday, citing what it said were the views of industry sources and experts.

The report is the latest warning to the country's bond market after the People's Bank of China (PBOC) sounded concerns and introduced plans to sell treasury bonds to cool a bond rally.

It came after the paper said late on Friday that China's central bank is determined to maintain a normal upward-sloping yield curve and correct bond-market risks.

The PBOC said earlier this month it has hundreds of billions of yuan worth of bonds at its disposal to borrow, and will sell them depending on market conditions.

The move shows the central bank's desire to stabilise exchange rate and economic expectations, Financial News reported, citing unnamed experts.

"Financial institutions frantically snapping up government bonds equals to expecting that interest rates will get lower and lower in the future," the paper said.

"They are basically shorting China's yuan and the Chinese economy, increasing the pressure for capital outflows." (Reporting by Shanghai Newsroom; Editing by Muralikumar Anantharaman)