(Bloomberg) -- China’s government bonds have defied inflation concerns and higher U.S. yields. Now investors are turning their attention to a central bank that’s expected to keep liquidity loose to buoy economic growth.

Traders will be given further direction on how Beijing plans to manage the nation’s cash supply when 100 billion yuan ($15 billion) of loans come due Monday. The People’s Bank of China is most likely to use its monthly medium-term lending facility to offset the maturing funds, according to Australia & New Zealand Banking Group Ltd., as authorities seek to soothe concerns over higher factory-gate prices.

The central bank can use the facility to inject or withdraw one-year liquidity from the financial system. While a drainage could sink stock market sentiment-- as traders saw last month -- a net cash addition could boost bonds that are trading near the strongest since January.

“The PBOC doesn’t need to add more liquidity given borrowing costs are low,” said Xing Zhaopeng, a senior strategist at ANZ. “And it doesn’t want to drain funds to hurt sentiment when traders are already worried about inflation.”

Chinese government bonds have gained for three weeks in a row, the longest run since January. That’s even as Treasury yields have climbed and a surprisingly quick jump in the nation’s factory-gate prices were seen to pose a challenge to current monetary policy.

Factors behind the resilience include ample liquidity in the money market -- the benchmark rate recently hit a four-month low -- and bets that the PBOC would ensure cash supply is plentiful to support growth. Capital inflows, which accelerated in April, also helped.

“There’s no need to sell China’s bonds despite higher inflation,” said Qin Han, an analyst at Guotai Junan Securities Co. “Even if bonds fall due to inflation in the coming two months, I’d recommend investors to take the opportunity and buy more.”

The yield on China’s government bonds slid to the lowest level in nearly four months last week, as low borrowing costs made it attractive for traders to buy them. While the loose conditions could be tested by a rise in debt sales in May, the PBOC’s vow to keep cash supply ample has boosted confidence.

While a net withdrawal like last month’s would weigh on sentiment, “it’s partially already priced in,” said Marvin Chen, an analyst with Bloomberg Intelligence. “On the other hand, if there is a big surprise, it could improve sentiment.” China’s CSI 300 Index is down 0.3% this month.

The PBOC has done the minimum in daily operations over the past two months. It has been injecting 10 billion yuan of cash daily-- no matter the size of funds coming due -- since the start of March. That’s a sign the central bank is so far pleased with the subdued volatility in the money market.

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