(Bloomberg) -- China ramped up warning against bond bulls via state-media reports as a debt-buying frenzy re-emerged.

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Funds investing in bonds will find it difficult to sustain the returns, which have exceeded 10% in some cases so far this year, the People’s Bank of China-backed Financial News said in a report Saturday.

If yields rise, long-duration bonds will “face larger risks of a retreat in capital gains,” the report said, citing unidentified people close to regulators.

The PBOC has repeatedly hinted its discomfort over the bond rally in the past few months as long-term yields touched two-decade lows. While lower yields mean cheaper borrowing costs for the economy, they can also destabilize financial markets and derail the recovery should speculative trading grow.

In another report late Friday, the newspaper said investors are underestimating factors such inflation that may upend the bond rally. The recent trend of money leaving bank deposits and flowing into asset management firms in search for higher returns will only temporarily boost demand for bonds, it said.

There are few signs of the enthusiasm fading. A 50-year special bond auction last week drew solid demand, while 30-year government bond yields declined to the lowest level in more than seven weeks on Friday to 2.49%.

The PBOC left a key interest rate steady for the 10th straight month on Monday, displaying caution on monetary easing given abundant liquidity and the pressure to prevent the yuan from weakening further.

The verbal warnings may put a floor on the 30-year yields at around 2.4%-2.5%, but the bond moves may still be biased lower in the absence of more forceful measures to halt the rally, Huatai Securities strategists including Zhang Jiqiang wrote in a note.

(Updates with China’s interest-rate decision in sixth paragraph)

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