China Bonds Set For Inflows

The PBOC matched maturities with injections again today, the seventeenth straight day of matching maturities, while the bank hasn't injected funds since February 25. The market appears sanguine about liquidity, the overnight repo rate is last at 1.8081%, from around ~2.00% last week while the 7-day repo rate last at 2.1897%, below the prevailing PBOC repo rate of 2.20%

• Futures are higher, building on gains from yesterday, alongside muted gains in equity markets. The uncertainty from Archegos Capital related block sales is seeing bonds favoured over equities. 10-Year future up 0.06 at 97.495.
• There were reports in the Nikkei that the US and Japan are planning to note the importance of stability in the Taiwan Strait in a joint statement that will be issued after a summit meeting between Biden and Suga in April. China has previously said that the US should stop meddling in its affairs with Taiwan, there has been increasing military activity in the South China Sea recently.
• Meanwhile, index provider FTSE Russell gave final approval on Monday for inclusion of Chinese sovereign bonds in its flagship bond index setting the stage for billions of dollars of inflows into China. FTSE Russel will add Chinese Government Bonds to the FTSE World Government Bond Index (WGBI) with a weighting of 5.25% to be phased in over a 36-month period, starting from October. The 36-month transition is longer than expected.