CHINA PRESS: China, U.S. Should Use Negotiation Mechanism

China and the U.S. will continue negotiating tariff and non-tariff barriers such as investment, market access and key mineral supplies, Global Times reported, citing Huang Zhengliang, a researcher associated with the Ministry of Industry and Information Technology. Yang Shuiqing, a scholar at the Chinese Academy of Social Sciences, noted ongoing U.S. investigations into semiconductors, pharmaceuticals, automobiles and key minerals risked increased tariffs on these sectors.

USD/CNH has traded to fresh lows under 7.1800, which is a YTD low in the pair. We last traded around these levels in Nov 2024. In terms of levels to be mindful of as potential downside targets - the Oct 29 high from last year was 7.1642, while we had some lows near 7.1400 post the US election result last year. 

• CNH sentiment has been buoyed post the CNY fixing result, which delivered a sub 7.2000 outcome, which the market took as further signal for yuan gains. The fixing error was also tighter despite higher USD index levels overnight.
• USD/CNY spot is also sub 7.1900 but above 7USD/CNH levels at this stage.
• The yuan continues to enjoy positive sentiment post the better than expected trade meeting results from the weekend.
• Focus will be on follow ups, with US President Trump stating he may have a call with China President XI Jinping this week. Onshore China media stated that: "China is willing to continue trade talks with the US based on the positive outcomes from the meeting in Geneva, even though the road ahead may be bumpy, according to a commentary by People’s Daily, the flagship newspaper of the Chinese Communist Party." (via BBG).   

The Japanese Ministry of Finance (MoF) will today sell Y800bn of 30-Year JGBs. The MoF last sold 30-year debt on 8 April 2025. The auction drew cover of 2.9582x at an average yield of 2.414%, an average price of 99.75, a high yield of 2.457%, and a low price of 99.00, with 33.8235% of bids allotted at the high yield.

• Last month’s 30-year bond auction delivered disappointing results. The low price fell short of dealer expectations, according to a Bloomberg poll. Additionally, the cover ratio declined to 2.9582x from 3.4997x and the auction tail widened significantly to 0.75 — the largest since 2023 — up from just 0.12 previously, all pointing to noticeably weaker demand.
• Today’s supply also follows a 10-year JGB auction, which delivered weak results. The low price fell short of expectations, the cover ratio decreased to 2.5440x from 3.1475x, and the tail lengthened to 0.18 from 0.11.
• Results are due at 0435 BST / 1235 JT.