The People's Bank of China (PBOC) will borrow the medium- and long-term bonds on an open-ended unsecured basis and sell them depending on market conditions, as it has signed agreements with several major financial institutions regarding bond borrowing, according to the bank.

The official remarks come at a time China's sovereign bonds have performed strongly this year, with yields hitting record lows, as a wobbly economy and volatile stock markets pushed savers into fixed-income safe haven investments.

China's treasury bond futures fell across the board on Friday, while bond yields, which move inversely to prices, went up.

Ming Ming, chief economist at CITIC Securities, said the comments further clarified the central bank's borrowing and subsequent selling of treasury bonds.

"With the size of the treasury bonds at the central bank's disposal reaching hundreds of billions of yuan, a single day of concentrated selling will have a significant impact on the market," Ming said.

China's central bank said earlier this week it would borrow treasury bonds from some primary dealers soon, outlining the specifics of a plan analysts say is aimed at putting a floor under plunging domestic interest rates.

The PBOC's borrowing of treasury bonds will set the stage for possible treasury bond selling, a new tool that will help it control the flow of credit and market yields.

"Without wider monetary tightening, which doesn't appear to be on the cards, the best the PBOC can probably hope to achieve is to engineer a short-term pause to the bond rally," said Julian Evans-Pritchard, head of China economics at Capital Economics.

PBOC Governor Pan Gongsheng hinted at the Lujiazui Forum last month that the central bank might soon start trading in the secondary bond market.

The central bank said in May it would sell low risk debt including government bonds when necessary, while paying close attention to current bond market changes and potential risks.

Bloomberg News first reported on the PBOC's bond borrowing agreement.