6.50 In Focus for USD/CNH

PBOC fixed USD/CNY at 6.4845, another miss lower for sell side estimates. The PBOC should be more comfortable with the redback weakening as the greenback makes strides forward.

• USD/CNH briefly made its way over 6.50 before pulling back as the greenback lost some of its luster last at 6.4960, the pair hasn't closed above the level since Dec 31.
• The PBOC drained CNY 150bn via OMOs, the most since October even as overnight repo rates hit multi-year highs. The spread between the 10-year bond and overnight repo rate is now just 16.5bps after being closer to 250bps in December There was a piece in the Securities Journal that attempted to reassure markets that China will offer additional liquidity ahead of LNY.
• Elsewhere the MOF released a statement on government finances which said that China's national fiscal revenue was 18.3t yuan in 2020, down 3.9% from 2019, erasing a 3.8% advance in the previous year. Fiscal spending rose 2.8% to CNY 24.6t, compared with 8.1% growth in 2019. The government said it would set a reasonable ceiling for government debt, maintain moderate expenditure and keep macro leverage ratio stable.
• Government debt is around CNY 46.55tn, equating to a debt-GDP ratio of 45.8%.