CHINA: Expected RRR Cut Delayed, CGB 10-Yr Higher
- Local press are suggesting that on the back of the very strong export numbers for February, any intended monetary policy changes in China may now be delayed until May.
- This has seen a modest move higher in yields with the CGB touching 1.82% - having reached 1.78% last week.
- Futures are off modestly with the 10-Yr down -.045 to 108.255
- The 2-YR is down -.01 to 102.456.
- During the 2026 National People's Congress, China's central bank governor Pan confirmed that the PBOC will maintain a "moderately loose" monetary policy throughout 2026. The primary goal is to provide a supportive financial environment for the start of the 15th Five-Year Plan while guiding prices toward a "reasonable recovery" to combat deflationary pressures.
- Expectations have shifted in recent days around policy changes. Leading into the NPC expectations were for an imminent RRR cut following the conclusion of the NPC.
- A delay could see the CGB 10-Yr re-establish itself in the 1.80-1.90% range again.
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AUSSIE BONDS: AU-US 10Y Diff Holding At Cycle High
The cash ACGB 10-year is 4bps cheaper today, with the AU-US 10-year yield differential around its cycle high of +65bps.
- Since early December, price action has effectively consolidated the differential’s 50-65bps trading range following the breakout above the ±30bps range that had prevailed since November 2022.
- This widening has coincided with a steady lift in market-implied expectations for the RBA cash rate.
- A simple regression of the 10-year yield differential against the AU–US 1-year forward 3-month (1Y3M) swap spread over the past two years suggests the current spread is around 6bps below its regression-implied fair value (see chart).
Figure 1: AU-US Cash 10-Year Yield Differential (%)
Bloomberg Finance LP / MNI
CRYPTO: Bitcoin - Bounces Back Above $70k After Friday Capitulation
Bitcoin had a range over the weekend of $67,324.98 - $71,465.34, Asia is currently trading around $70500, -0.20%. Bitcoin had a solid bounce off of the $60k area as risk turned higher after what looked like another leg of stops being executed. We have seen some huge deleveraging of risk, most notably in Metals and Crypto, could that be it for now ? Technically it remains in a bear trend and we would need to see demand like we saw on Friday return and form a base down here from which to move higher again. The first sell-zone is right here in the $72k-$76k area and then the $80k-$85K area where sellers should return initially.
- Holger Zschaepitz on X: “I like this chart from the latest note by credit legend Matt King, who shares sharp and often provocative ideas through Satori Insights. It shows a correlation between the change in the Fed's balance sheet and Bitcoin. His rule of thumb is that expansions in central bank reserves tend to inflate the frothiest parts of the market, crowding out value investing and encouraging momentum, FOMO, and trend-chasing. It’s not hard to imagine a scenario in which these segments come under pressure one by one – starting w/Bitcoin: "We’ve long argued that momentum-driven markets are prone to sawtooth-shaped pullbacks. A shift toward smaller central bank balance sheets would likely accelerate those reversals." See Graph below.
- Bitcoin’s Average True Range(ATR) for the last 10 Trading days: $5,058
Fig 1: Bitcoin spot Daily Chart
Source: MNI - Market News/Matt King/@Schuldensuehner
CNH: Downtrend In USD/CNH Still Intact As LNY Approaches, CNH/JPY Falters
Spot USD/CNH tracks near 6.9320 in latest dealings, very close to recent cycle lows of 6.9290. The pair fell through Friday trade, largely tracking broader USD index losses, as risk appetite stabilized (precious metals higher, equities bounce). This leaves the technical downtrend intact for the pair, with the 6.9000 region the downside focus point, although we have had a very steady start to this week. Some USD softness, centered around yen gains, has largely been ignored by CNH so far today. For USD/CNH, the 20-day EMA resistance point, which has capped recent upticks in the pair, rests close to 6.9515/20. Further north is the 50-day around 6.9900.
- Broader G10 focus rests on USD/JPY gyrations post the strong weekend election outcome for PM Takaichi. CNH/JPY is off earlier highs, last around 22.595 (earlier we got close to 22.76). Shifts in this cross are more likely to reflect JPY moves than vice versa.
- The USD/CNY fix fell, but the error term was wider earlier, with little impact on CNH. Note the lunar new year break kicks off at the start of next week, so corporate flows may start to slow from a repatriation stand point.
- Spot USD/CNY is also little changed in the first part of trade, last around 6.9340/45. The CNY CFETS basket tracker is slightly off recent highs, last around 98.19.
- This week we have Jan new loans/aggregate credit data. Also note on Wednesday Jan CPI is due.
