(March 19): A recent bull run in China’s government bonds is making a comeback after a one-week break, a sign that traders are getting over policymakers’ implicit guidance that the rally has gone too far.

The yield on 30-year government bonds slipped for a third straight day to approach the lowest level since 2005, according to data compiled by Bloomberg. The rally comes in a market where traders weigh the impact of China’s plan to boost its issuance of ultra-long sovereign notes and the prospect of further monetary easing by the central bank amid a weak economy.

Earlier this month, a rapid advance in Chinese bonds was disturbed by an uptick in the nation’s inflation data and signs that Beijing is growing uncomfortable with the overheated debt market. An unexpected liquidity drainage by the PBOC also added to speculation that the authorities are worried about their monetary easing only fueling asset gains in financial markets rather than being funnelled into the real economy.

Investors are speculating that the People’s Bank of China (PBOC) would need to lower the amount of cash lenders set aside as reserves or use other easing measures if the nation were to sell the ultra-long bonds in targeted auctions, said Albert Leung, a strategist at Nomura International in Hong Kong. The room for further declines in yields is limited, he added.

The speculation echoed a report in a state-run newspaper earlier this month. China may sell its 1 trillion yuan ($139 billion) of special bonds in a combination of target issuance and public auctions, a central bank-backed newspaper reported, citing an analyst at Citic Securities Co. Such a move could limit the impact large debt sales may have on liquidity conditions, the paper said.

Late last week, China reported data showing local banks extending loans at the slowest pace on record in February. That means the PBOC will have to keep liquidity conditions loose to boost credit growth, which gives traders more funds for bond investments.

The yield on 10-year sovereign notes was steady at 2.28%, hovering near the lowest level since official data started in 2002.