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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CHINA
- This week, China officials decided to cut interest rates as new data showed that the economic activity has been losing steam significantly due to renewed Covid lockdowns and uncertainty on the property market.
- The PBoC cut its 7D reverse repo rate by 10bps to 2% for the first time since January.
- Even though the move took investors by surprise, money market rates have been pricing in further cuts from PBoC for a while as the 7D IB repo rate has been trading significantly below the policy rate for a few months (see link here: https://marketnews.com/money-market-rates-pricing-in-more-cuts-but-china-officials-reluctant-to-ease-further).
- Empirical studies have shown that the 7D repo rate has historically been a reliable indicator when it comes to future PBoC moves.
- Hence, the rate cut led to a drop in China LT bond yields, with the 10Y breaking below the 2.6730% ST support level, which corresponds to the 76.4% Fibo retracement of the 2.4610% - 3.3580%.
- Next ST Support to watch stands at 2.60% (May 2020 lows).
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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