(Bloomberg) -- China has stepped into the nation’s government bond market, ending months of speculation that officials would act to rein in a dangerously sharp bond rally.

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The People’s Bank of China sold long-dated bonds and bought short-maturity securities in a move that resulted in a net purchase of 100 billion yuan ($14 billion) of debt in August, according to a statement on its website. The trades may help curtail aggressive gains in the nation’s bonds that have pushed benchmark yields to a record low as investors bet the central bank will ease monetary policy to support growth.

The scale and speed of the rally has prompted hand-wringing among traders and within state-backed media about the potential for a market meltdown if the money that’s flooded into Chinese debt rapidly reverses. Just this week, a newspaper backed by the central bank warned that financial stability could be at stake if a crowd of debt investors were to “stampede” to the exits.

“The central bank’s efforts to correct bond-market imbalances are intended to prevent long-term bond yields from rapidly falling out of a reasonable range in the short term,” said Tommy Xie, head of greater China research at Oversea-Chinese Banking Corp. Such a move “could skew market expectations and, in turn, help contain systemic risk.”

The central bank stopped short of specifying the tenors of the bonds it traded or the dates of its operations in its Friday statement, but its actions could help push up longer-term yields relative to short-term rates, steepening the yield curve.

What Bloomberg Strategists Say...

“Policymakers have more to do on top of bond trading to support yields and divert the economy from its deflationary track.”

—Simon White, macro strategist at MLIV in London

Concerns over a slowing economy, expectations for interest-rate cuts, and a lack of attractive investment alternatives have led investors to pile into Chinese government bonds this year. Officials have been seeking to ensure that this doesn’t become a one-way crowded trade, wary of how swings in US Treasuries contributed to the 2023 collapse of Silicon Valley Bank.

After starting with just verbal warnings earlier this year, the PBOC’s pushback against the bond rally has become more active in recent weeks. Debt sales by state banks to drive up yields and repeated regulatory checks on some investors have kept traders on edge and dampened trading.