Benchmark Rates Nudge Higher On Monday, MLF Rates Unch. Alongside Small Net Injection

The lack of MLF rate cut from the PBoC on Monday (although only one of the 18 surveyed by BBG looked for such a move) seemingly biased Chinese benchmark rates higher to start the week, with a bid in equities providing fresh payside flow as the session wore on.

• Note that the MLF operations saw a net injection (CNY25bn), although the majority of those surveyed by BBG expected no net injection via a basic rollover of funds maturing. Some are judging this as a sign that Chinese policymakers continue to support the economy given the recent run of softer-than-expected data releases. A reminder, last week we highlighted that 5-Year interest rate swaps and 10-Year CGB yields were back to levels not seen since ZCS times, which effectively meant that those benchmark rates were nearing/at an area that probably required a more meaningful easing stance from the PBoC, if they were to become embedded over the medium term.
• The 7-day repo fixing nudged higher for the first time in a week.
• Zooming out we remind that China’s Swap Connect scheme opened on Monday.
• In the background, we also note the latest default in the property developer space as well as a liquidation order for a corporate name that failed to present meaningful restructuring plans after a previous default.