(Bloomberg) — The frenzy for Chinese bonds is showing no signs of fading, with the nation’s longest-dated special government notes receiving stronger-than-expected demand at an auction.

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China sold 35 billion yuan ($4.8 billion) of 50-year special government bonds at a yield of 2.53%, according to traders. That compares with an estimate of 2.58% in a Bloomberg survey. The debt received more than five times the demand than what was on offer, said the traders who asked not to be identified as the information is private.

This sale is part of China’s 1 trillion yuan special sovereign notes issuance for 2024. Investors have been eagerly buying these bonds amid lingering pessimism over the economy, despite warnings from authorities on the risks of a bond bubble, particularly in longer-dated debt.

China’s consumer prices rose less than expected in May, and factory prices fell for the 20th month in a row, fueling calls for more policy action to support growth. The People’s Bank of China hasn’t cut interest rates since August, as a wider yield gap with the US would increase the depreciation pressure on the yuan. The central bank is set to decide on the rate on its medium-term loans on Monday.

The optimism isn’t limited to the government debt market, as yields on Chinese corporate bonds are also falling. The yield gap between three-year AAA rated credit bonds and sovereign notes is now near a record low that was set in 2022.

The 20-year special bonds issuance last month saw bids that were four times the planned auctioned amount. Prior to that, retail investors drove up the prices of a 30-year note by as much as 25%, prompting a trading halt. The next day, state media urged retail investors to be more rational in their purchases.

The last time China issued a 50-year government bond was on March 22. It was sold at a yield of 2.65%, which was a record low for an auction of that tenor at the time, and the bid-cover ratio for the sale was 3.81.

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