CHINA RATES: MNI: China Repo Rates Fall On Thursday

• CHINA PBOC INJECTS CNY2 BILLION VIA 7-DAY REVERSE REPOS TUES

The USD/CNY fix printed at 7.1059, versus a Bloomberg consensus of 7.2444.

• The fixing outcome saw an error term of -1385pips in USD/CNY terms, wider than yesterday's -1292pips outcome, but within recent ranges.
• The actual fix is the highest since late Feb, but only marginally above yesterday's outcome of 7.1043. The upper limit on daily spot is around 7.2480.
• USD/CNH is a touch weaker post the fixing, but still above 7.2500 at this stage. Broader USD sentiment is softer, which is likely helping at the margins.

In Tokyo morning trade, JGB futures are little changed compared to settlement levels as overnight strength is unwound.

• Jibun Bank and S&P Global released April's flash PMIs: Mfg rose to 49.9 from 48.2 in March; Services rose to 54.6 from 54.1 in March; and Composite rose to 52.6 from 51.7 in March.
• The market’s focus, however, remains on the BoJ Policy Decision on Friday. No policy adjustment is anticipated at the two-day meeting ending on Friday. However, a growing number of economists foresee the possibility of the BoJ implementing another rate hike in October, with many highlighting July as a potential earlier timeframe. The prospect of a weaker yen is cited among the factors that could accelerate this timeline.
• Nonetheless, it is anticipated that the BoJ will revise its inflation forecast for the current fiscal year to 2.6% and project a 2% price growth for the fiscal year commencing in April 2026. This adjustment reflects optimism regarding wage trends.
• Ahead of today’s 2-year supply, the cash JGB curve bear-steepened, with yields flat to 2bps higher. The benchmark 10-year yield is slightly lower at 0.884%, just shy of the YTD high of 0.891%.
• The swaps curve has twist-steepened, pivoting at the 10s, with rates 1bp lower to 4bps higher. Swap spreads are tighter out to the 7-year and wider beyond.