Back From Best Levels

The impact from the softer than expected Chinese economic activity data for April has moderated from extremes, leaving TYM2 +0-05+ at 119-11, 0-07 off best levels, while cash Tsys sit 0.5bp cheaper to 1.0bp richer across the curve, twist flattening, pivoting around 5s. As we detailed earlier, all things China have been in the driving seat thus far, with today’s PBoC MLF inaction and softer than expected data more than countering the early price action that focused on the risk-positive China stories from the weekend (the start of the steady re-opening of Shanghai and the latest batch of property easing measures). Note re: the “positives,” subsequent rhetoric from Shanghai city officials pointed to continued caution re: the unwind of social mobility restrictions, while various sell-side names have questioned the impact that the previously outlined policymaker moves in the Chinese mortgage market (lowering the lower bound of interest rates for first time buyers) will have.