A More Defensive Feel Creeps In On PBoC Inaction

A lack of movement from the PBoC in today’s 1-Year MLF operations (net liquidity and interest rates unchanged) has seemingly disappointed markets (note that a slim majority of those surveyed by BBG looked for no change in the MLF rate, as we flagged ahead of the operations), with S&P 500 e-minis back to neutral levels and Chinese equities back from their early levels shortly after the re-open. Elsewhere, the PBoC provided a marginally softer than expected CNY fix vs. the USD, breaking a streak of 9 consecutive firmer than expected fixes (In CNY terms). This, coupled with the PBoC disappointment, has seen commodity-tied G10 currencies trade on the backfoot, while USD/CNH has unwound some of its early move lower and USD/JPY is back to near-enough unchanged levels after showing higher during early Asia dealing. U.S. Tsys have also moved away from session cheaps.