SOUTH KOREA: Bond Futures Post Strong Gains; Remain in Downtrend Channel
- Korean bond futures are up strongly in the morning session following the dual leads from the UST moves overnight and strength in JGBs. The 10-Yr is currently up +.343 at 111.05, near to the topside resistance from the 20-day EMA of 111.05. Earlier the 10-Yr reached a high of 111.11 but as the impact from the orders at open dissipate, has settled back below the 20-day EMA.
- The gains this morning see the 10-Yr remain within the downtrend channel that began in October as markets started to price rate cuts previously priced. Currently there is very limited priced in over the course of the next 6 months as the BOK and government focus on the Won and cooling the housing market respectively.
- The 3-Yr future is up strongly also Wednesday. The 3-Yr reached a high of 105.02 earlier before moderating to 105.00 for gains of +.13 today.
- Cash is strong with yields up to -4.5bps lower on the curve, with longer bonds outperforming. The 10-Yr has consolidated back below 3.70%, and is currently at 3.64% today (down -4.5bps) yet the 10-Yr remains above the mid point of the 1 month range
- The KOSPI has posted modest gains of +0.55% this morning and the Won modest gains.
- Later we get bank lending to households. This is eagerly watched by bond investors for signs that policy is slowing mortgage growth.
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CHINA: Central Bank Injects CNY36.1bn via OMO
A modest injection to start the week as repo rates remain contained and the maturity schedule for the week ahead modest. There appears at this stage no major impacts from the significant liquidity withdrawal last week.
- The PBOC issued CNY86.1bn of 7-day reverse repo at 1.4% during this morning's operations.
- Today's maturities CNY50bn.
- Net liquidity injection CNY36.1bn.
- The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.42%, from prior close of 1.47%.
- The China overnight interbank repo rate is at 1.27%, from the prior close of 1.28%.
- The China 7-day interbank repo rate is at 1.52%, from the prior close of 1.50%.
MNI: CHINA PBOC CONDUCTS CNY86.1 BLN VIA 7-DAY REVERSE REPO MON
- CHINA PBOC CONDUCTS CNY86.1 BLN VIA 7-DAY REVERSE REPO MON
CNH: USD/CNY Fixing Adds To USD/CNH Downside Momentum
The USD/CNY fix made another fresh low today, 7.0108, versus 7.0128 on Friday. The fixing error was slightly tighter at +262pips, versus +295pips on Friday. The continued downtrend in the fixing is likely to help reinforce USD/CNH weakness. This pair is back under 6.9670 in latest dealings, challenging recent lows of 6.9664. Broader USD is sentiment is firmly on the backfoot (BBDXY index off 0.20%) as earlier headlines crossed that Fed Chair Powell was the subject of a US Federal Prosecutor probe. A fresh break lower in USD/CNH will bring 6.9500 into focus.
