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China Adds Liquidity First Time Since March

ASIA RATES
  • INDIA: Yields mixed in early trade with focus on the RBI's INR 260bn bonds sale tomorrow. Bonds rose for the second day yesterday after the RBI's sale of bills was taken down smoothly, the INR 360bn sale saw cut off yields in line with expectations. The bill sale last week was weak, with cut offs hitting the highest in over a year after higher inflation data.
  • SOUTH KOREA: Futures were hit back to neutral levels after hawkish comments from BoK Governor Lee who said that policy normalisation would begin this year. Lee noted that given the extraordinary levels of monetary accommodation a rate hike should not be seen as tightening, but normalising. Lee also noted it was necessary for fiscal and monetary policy to compliment each other. Data earlier in the session showed consumer confidence rose for the sixth straight month.
  • CHINA: The PBOC injected a net CNY 20bn into the financial system today, the first injection since March. Repo rates are lower with the overnight repo rate dropping below 2%, the decline helped support futures. There had been several commentary pieces from state media suggesting there could be liquidity injections in June but markets had to wait a long time for those to come to fruition. While the injection is small in standalone terms it indicates that the PBOC stands ready to adjust liquidity conditions if needed. While repo rates had been creeping higher they weren't at levels high enough to give the central bank concern, unlike the spike in January heading into LNY. The 20 day rolling average of DR007 has hovered just above the PBOC's 7-day repo rate (2.20%) for the past 11 days.
  • INDONESIA: Curve twist steepens, Pres Widodo decided to stick to the plan of implementing partial restrictions, shrugging off calls for stricter measures, even as Indonesia declared a record increase in new Covid-19 cases on Wednesday. Worth noting that the latest Insight piece from our Policy Team noted that "Bank Indonesia's concerns are beginning to focus on the danger that direct government financing under its QE programme could undermine international investor confidence and cause a run on the rupiah".
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