May 8 (Reuters) - China's central bank said on Wednesday that it can either buy or sell treasury bonds in the secondary market depending on market conditions, as such trades can be used to manage liquidity.

The People's Bank of China's (PBOC) made the statement after Reuters sought comment on market talks that the bank had been gauging demand for long-dated treasuries from some state banks.

It also comes amid avid speculation that the PBOC will soon start treasuries trading - an unconventional tool in China - as the government prepares to ramp up bond issuance.

"The central bank's buying and selling of treasury bonds in the secondary market can be used as a liquidity management method and a reserve of monetary policy tools," the PBOC said in a statement to Reuters, reiterating a point it made in state media two weeks ago.

"In practice, the operation of buying and selling of treasury bonds will be two-way. The operation can either be purchase, or sale, depending on regulatory needs as well as the condition of market supply and demand."

Many analysts had expected the PBOC to use the tool to mainly pump liquidity into market as treasury bond issuance will likely quicken.

Beijing plans to issue 1 trillion yuan ($138.01 billion) in special ultra-long term treasury bonds this year to support some key sectors of the economy.

Expectation of bond trading by the PBOC heated after a recent book compiling Xi Jinping's statements showed the Chinese president had said the central bank should gradually increase the buying and selling of treasuries in open-market operations.

The PBOC tested trading treasury bonds in 1997, but soon gave up the practice as China's bond market was not deep enough at the time, according to Chinese media.

Currently, the PBOC's methods of managing liquidity mainly include lending facilities in the interbank market and banks' reserve requirements. (Reporting by Shanghai and Beijing newsroom; Editing by Alexandra Hudson)