CHINA: Additional Analyst Views On Today’s Stimulus Measures
May-07 17:56
- ABN AMRO says that today’s measures were in line with their expectation of additional monetary easing in the form of policy rate and RRR cuts, combined with the further stepping up of fiscal support. They expect cuts in other policy rates, such as the loan prime rates, and the 1-year medium-term lending facility rate, to follow soon.
- ANZ believes that the timing of the announcement offers a policy buffer for Chinese exporters before the trade talk between US and Chinese officials in Switzerland this week. The authorities are prepared to have a protracted negotiation and hold a strong stance against protectionism. Given the extent of policy easing, the onshore interest rate will drop further in May. Banks will receive a large injection ahead of summer when many college graduates enter the job market. The overnight repo will likely be guided to below 1.5%.
- DBS says that the new set of policies sends a positive signal to the market. Offshore CNH once hit 7.19 on an intra-day basis. Onshore 2Y CGB yields edge down from 1.48% to 1.46%, while 10Y yields remain steady at around 1.63%. Looking ahead, the benchmark rate cut will likely keep short-end CGB yields in-check. Long-end rate will remain stable amid a more optimistic growth outlook, better asset market performance and accelerating bond issuance. The upshot is that curve will likely steepen.
- Nomura does not believe these monetary and financial policies on their own are sufficient to address the double whammy faced by the economy. A slump in exports appears inevitable, while the property sector is still declining at a worrying pace. To cope with these unprecedented challenges, Nomura believes Beijing needs to take bolder moves, especially on the fiscal front. They maintain their forecast for another 50bp RRR and a 15bp policy rate cut in Q4.
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BONDS: Schatz Futures Positioning Goes Long (1/2)
Apr-07 17:53
Per our latest edition of MNI Pi (Download Full Document Here):
- German contracts, which were all all "short" or "very short" in our last biweekly update, have seen a notable shift in Schatz and Bobl, to long and flat respectively, following long-setting trade last week.
- Bund and Buxl remain in short territory but off recent extremes (Bund had been "very short" two weeks ago), having seen short covering last week.
US: FED Reverse Repo Operation
Apr-07 17:38
RRP usage retreats to $148.146B this afternoon from $184.499B on Friday. Usage had surged to the highest level since December 31, 2024 last Monday, March 31: $399.167B. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 30.
GBPUSD TECHS: Support Broken At The 50-Day EMA
Apr-07 17:30
- RES 4: 1.3434 High Sep 26 ‘24 and a key resistance
- RES 3: 1.3305 High Oct 2 ‘24
- RES 2: 1.3207/3274 High Oct 3 ‘24 / High Apr 3 and the bull trigger
- RES 1: 1.3016 50.0% retracement of the Apr 3 - 7 pullback
- PRICE: 1.2744 @ 16:45 BST Apr 7
- SUP 1: 1.2726 Low Apr 7
- SUP 2: 1.2679 Low Mar 4
- SUP 3: 1.2671 2.0% 10-dma envelope
- SUP 4: 1.2559 Low Feb 28
Monday’s rejection of a further push higher in the pair works against constructive outlook in the initial tariff reaction. Key support at the 1.2792 50-day EMA has given way . The bull trigger remains 1.3207, the Apr 3 high. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend for now.
