EQUITIES: Light Bid On Report China Restricting Net Sales By Large Investors
MNI (London) - Benchmark global equity indices move further away from session lows as RTRS sources note that “Chinese bourses have set daily restrictions on net share sales by hedge funds and large retail investors”.
- While this isn’t a new method and has been deployed during previous instances of market pressure, it signals that Chinese authorities are becoming more forceful when it comes to preventing further equity weakness in the latest instance.
- The sources suggest that a “soft limit on daily net sales by individual hedge funds and big retail investors - implemented through verbal warnings from brokerages - had been set at 50 million yuan”.
- A reminder that the Chinese sovereign wealth fund has already signalled a higher allocation to equity ETFs, while hopes of deeper monetary and fiscal stimulus (a particular focus is on this month’s Politburo meeting) has also provided some background support.
- Elsewhere, a previous RTRS sources piece noted that “brokerages have been asked to closely monitor transactions by private funds and big retail clients”.
- Note that the recovery rallies in the likes of the S&P 500 e-mini and Euro Stoxx 50 remain relatively shallow intraday, given ongoing geopolitical/trade uncertainty.
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GILT AUCTION RESULTS: Decent Auction Relative To Previous 10-year Re-openings.
Decent Gilt auction relative to the re-openings of the previous on-the-run 10-year 4.25% Jul-34 Gilt. The bid-to-cover ratio of 2.92x is broadly in line (if not a bit higher) than seen for re-openings of the Jul-34 line. We had expected a solid bid-to-cover heading into the auction.
- Meanwhile, the yield tail of 0.5bps is tighter than the 0.8-1.3bp range observed for re-openings of the Jul-34 Gilt since September. We had flagged the risk of a wide tail in the region of 0.9bps heading into the auction (particularly given volatility in FI markets recently).
- The lowest accepted price of 98.542 was above the 98.5195 pre-auction mid-price. The Gilt currently trades at 98.5350 at typing.
CAD: SocGen See Value in USD/CAD Downside via Options
SocGen write that it is "time for USD/CAD puts" - they recommend positioning for a CAD recovery into the spring, and look to take advantage of 3m options that are still attractively discounted compared to front-end vols.
- They write that as trade fears have intensified the volatility skew in the direction of CAD bearishness, CAD calls are now discounted compared to ATM vol for all OTM strikes and, as such, low strikes of intermediate expiries are currently a sweet spot in the USD/CAD vol surface.
- They point to expressing this view via buying a 15D USD/CAD 3m 1.39 put strike or buying a USD/CAD 3m 1.37 one-touch option.
GILT AUCTION RESULTS: 4.50% Mar-35
| 4.50% Mar-35 | Previous | |
| Amount | GBP4.00bln | GBP13.00bln |
| Avg yield | 4.679% | 4.536% |
| Bid-to-cover | 2.92x | |
| Tail | 0.5bp | N/A |
| Avg price | 98.580 | 99.706 |
| Low price | 98.542 | |
| Pre-auction mid | 98.520 | |
| Previous date | 11-Feb-25 |
