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China Repo Rate Drop, Futures Hit Contract Highs

ASIA RATES
  • INDIA: Yields lower in early trade; a rise in goods and services tax collections for July could provide a boost to Indian assets including bonds, India Gross GST Collections came in at INR 1.16t in July, up from INR 928.5bn in June. Bonds did come under pressure on Friday though after another auction was rescued by primary dealers; of the INR 110bn of the 5.63% 2026 bond dealers took INR 74.7bn. The 5.63% 2026 line also suffered a weak auction on July 2 and INR 104bn of INR 110bn sold was devolved on primary dealers. This has led commentators to speculate that the RBI is targeting the 5-Year and 10-Year sector to anchor the rest of the curve. Later in the session markets await Indian manufacturing data
  • SOUTH KOREA: Futures in Korea under some moderate pressure but have recovered early losses, both contracts sticking to last week's well-defined range. Little movement in the cash space so far, 30-Year issuance was well received and saw similar cover to the previous auction despite a 25bps yield concession, the auction was the first sale from a reduced auction slate in August by around KRW 5.5tn compared to July. Elsewhere equity markets are in positive territory after recovering early losses. Data earlier saw South Korea Markit manufacturing PMI fall to 53.0 in July from 53.9 in June, while the local COVID-19 situation continues to remain a concern to officials.
  • CHINA: The PBOC matched injections with maturities today following a net injection of CNY 40bn in the last two sessions. Repo rates are lower, the overnight repo rate down some 28bps and the 7-day repo rate down 20bps and back below the PBOC's 2.20% rate. Bonds are sharply higher, futures making fresh contract highs, in the cash space yields are lower across the curve, the 10-Year yield at point touching the lowest since June 2020 at 2.81%. Stocks are in positive territory, recovering earlier losses of up to 1%.
  • INDONESIA: Yields slightly lower with IDR also seeing limited movement. Pres Widodo reiterated his opposition to a strict nationwide lockdown, which "won's necessarily end the problem". Widodo said that "people are screaming for a reopening" even as the country is now under a "semi lockdown, not a full lockdown" Indonesia's Markit M'fing PMI took a strong hit in July, with the index falling to 40.1 from 53.5, showing the fastest pace of contraction since June 2020. CPI rose slightly above expectations at 1.52% Y/Y.
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