UBS analyst wrote in a report that “we believe more and more Chinese entities will raise capital in the onshore bond market, given that the domestic market is already large and liquid enough to attract new investors.”

The report projects China’s local government bond market will grow to more than US$3 trillion in just the next three years from its current level of US$1 trillion, which would bring it more or less to the US$3.8 trillion total of municipal debt, reports CNBC.

Isaac Meng, emerging markets portfolio manager at PIMCO cautioned, though, the government bonds may be signaling trouble”

“A persistent wholesale funding squeeze and yield-curve inversion in a relatively opaque and interconnected financial system are signals of strain; they should be taken seriously by both policymakers and investors.”