CHINA RATES: China Repo Rates Diverge On Friday

Cross-asset moves as JPY crosses pull lower, e-minis move back into (marginal) negative territory and Tsys tick away from session cheaps. That leaves TYU2 -0-03 at 119-26+, 0-05+ off worst levels, while cash Tsys run little changed to 2bp cheaper across the curve, with the belly leading the weakness. There hasn’t been much in the way of meaningful headline flow to drive the move. Note that Chinese equities opened marginally lower on the day, aided by a modest uptick in COVID cases in the latest national daily count, which came after Tuesday’s announcement re: Shanghai moving to conduct mass PCR in some districts.

Yen crosses are under renewed pressure, although this is mainly being by lower USD/JPY levels. The pair is now down 0.5% from NY closing levels, to 135.20 last. EUR/JPY is down to 138.70, through the 50-day MA at 139.02. This may reflect carry over from the sharp overnight move lower in EU yields. EUR/USD is down modestly, (last 1.0260), while AUD and NZD are still slightly firmer against the USD, but comfortably down against yen. US equity futures are off their highs, but still in positive territory. Regional equity markets are opening weaker though.

The uptick in crude oil futures that we have flagged elsewhere, coupled with a light bid in e-minis, has seemingly capped Aussie bond futures during early Sydney dealing, with the major contracts failing to challenge their respective overnight peaks during an initial uptick, before pulling back from best levels. That leaves YM +5.5 and XM +11.0. Cash ACGB trade sees a parallel ~10.5bp of richening in the 10+-Year zone. EFPs have pushed wider on the session, with the 3-/10-Year box steepening. Bills run -1 to +5 through the reds, twist flattening.