CHINA: Central Bank Withdraws CNY19.3bn via OMO

In Tokyo morning trade, JGB futures are slightly stronger, +6 compared to settlement levels.

• Cash US tsys are 3-4bps richer in today's Asia-Pac session after being closed yesterday for Veterans Day.
• Cash JGBs are little changed across benchmarks. The benchmark 5-year yield is 0.3bps lower at 1.249% versus the cycle high of 1.272%, set this month.
• “JGBs traders can’t relax even though a 30-year sale is out of the way, as this week’s 5-year auction could be more challenging. That duration falls in the sweet spot where increased bond issuance is likely to fall as Prime Minister Sanae Takaichi aims to use her first stimulus package to jump-start the economy.” – BBG
• Ahead of tomorrow’s supply, the 2/5 yield curve has pushed close to the cycle high of 32bps set in late 2023. (see chart)
• The 30-year yield is little changed today after yesterday's heavy close (+3.6bps cheaper) following another lacklustre auction.
• Swap rates are little changed. 

Source: Bloomberg Finance LP

Money market rates are slowing starting to moderate as the PBOC has another day of significant liquidity injection.  The overnight money market rate spiked yesterday to its highest level since July.  

• The PBOC issued CNY195.5bn of 7-day reverse repo at 1.4% during this morning's operations.
• Today's maturities CNY65.5bn.
• Net liquidity injects CNY130bn.
• 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 1.43%, from prior close of 1.51%.
• The China overnight interbank repo rate is at 1.40%, from the prior close of 1.40%.
• The China 7-day interbank repo rate is at 1.49%, from the prior close of 1.51%.

The USD/CNY fix printed at 7.0833, a fresh low back to Oct last year. The fixing error was only marginally tighter at -315pips, versus yesterday's -331pip outcome. This comes despite the USD index moving off recent highs. This will help reinforce the bias around a resilient CNY backdrop. Still, USD/CNH hasn't reacted much, we hold above 7.1200 in latest dealings. We did get to 7.1188 prior to the fixing (which was still above intra-session lows from Tuesday at 7.1173).