US 10YR FUTURE TECHS: (U5) Bull Cycle Remains Intact

Block flow continues to tick over in Germany

• DUM5 2,148 lots blocked at 107.345 vs. OEM5 1,379 lots blocked at 118.890. Subsequent price action on the German 2s5s cash curve points to a flattener, albeit with a mismatched DV01 (correct weighted DV01 ratio is closer to 3/1).
• There was also a DUM5 block seen beforehand, with 4,692 lots blocked at 107.340, would suggest it was a buyer. DV01 EUR88K.
• OEM5 also saw some block flow, with 750 lots blocked at 118.880 and 1,000 lots blocked at 118.890, looks like buyers. DV01 across the two blocks EUR95K.

HSBC note that “USD/CNY fixing came in at 7.1833 today, falling below 7.19 for the first time since 3 April. The 86-pip drop in the fixing is the largest downward adjustment in the fixing since 21 January.”

• They also observe that “it was the first time that spot closed at a lower level (7.1895) vs the day’s fixing (7.1919) since 7 November 2024, suggesting that there should have been no counter-cyclical factor adjustment in today’s fixing. In that case, the fixing today shows a 24% beta to overnight DXY weakness”.
• On net, they believe that “these changes point to the PBoC’s tolerance for more CNY strength against the USD. Should the broad USD index continue to edge lower, the USD/CNY fixing is likely to continue to unwind the previous increase from the 7.17 handle before April”.
• Further out, they highlight that “whether the year-to-date low in the fixing in 7.1688 (17 March) will be held warrants close attention. We think the fixing is still likely to be adjusted in a gradual manner, given more elevated U.S. tariffs than before early April, lingering uncertainties on U.S.-China trade negotiations, and negative seasonality brought by corporates’ offshore dividend payments.”

MNI (London) - USD/CNH little changed on the back of a BBG source report suggesting that “China’s central bank asked its major lenders to raise the share of yuan when facilitating cross-border trade, in its latest push for the use of the currency as the world grapples with the onslaught of tariffs by the US”.

• BBG sources said that “the PBoC increased the floor ratio for yuan-denominated trade transactions to 40% from 25% as part of its recent adjustment to the so- called Macro Prudential Assessment”
• The piece then notes that while the following of the request is not mandatory, “banks missing the ratio often receive a lower score in regulatory review which will impact their future business expansion”.
• Lack of movement in CNH explained by the ongoing presence of the already well-documented Beijing goal of broader CNY internationalisation.
• USD/CNH last 7.1789, little changed on the day after it touched fresh ’25 lows at 7.1616 in Asia hours, before correcting from worst levels as the wider USD stabilised.
• Next support zone of note comes in at the 61.8% retracement of the Sep ’24-April ’25 USD/CNH rally (7.1461)/Nov 7 low (7.1415), which protects the Nov 4 low (7.0869).
• Bears remain in technical control.
• No reaction to earlier rating action from Moody’s, after the agency affirmed China at A1, Outlook Negative. A response from the Chinese Ministry of Finance points to continued confidence despite external challenges, with the Ministry’s market expectations and confidence remaining stable.

Fig. 1: USD/CNH

Source: MNI - Market News/Bloomberg