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China Yields Jump As Liquidity Drained

ASIA RATES
  • INDIA: Yields higher in early trade. Markets continue to digest the RBI's decision to end its bond purchase programme, the announcement on Friday saw the yield curve steepen and the rupee claw back losses. The Central Bank kept rates on hold as expected but made the decision to end the GSAP operations and announce additional measures to withdraw liquidity from the system in what was interpreted as a tacit tightening move. Bonds are expected to come under pressure today as markets continue to assess the implications of the RBI announcement, while crude prices push higher which will add to inflation worries. Markets will have a chance to gauge inflationary pressure this week at the release of the September CPI figure which is expected to moderate to 4.5% from 5.3% last time out, drawing closer to the 4% target rate. Industrial production and trade balance figures are also slated this week.
  • SOUTH KOREA: Market closed for holiday
  • CHINA: Repo rates jumped in China, the Central Bank drained a net CNY 190bn via OMOs as the pre-Golden Week liquidity additions continue to roll off. Overnight rate up 98bps at 2.1429, 7-day rate up 43bps at 2.0375% as the rates invert again for the first time since early September. Futures dropped with the 10-Year falling 34 ticks while in the cash space the 10-Year yield rose some 5bps to the highest level since July as stocks found favour.
  • INDONESIA: Yields higher across the curve. There were 894 new coronavirus cases in the past 24 hours, the lowest figure since June 2020, President Widodo has ordered the acceleration of the vaccination programme ahead of the reopening to international travelers next week. Elsewhere the Jakarta Post reported that Indonesia owes $17.28bn in "hidden debt" to China, i.e. over four times more than the officially reported sovereign debt. The U.S.-based AidData research lab noted that "hidden debt" has been issued to Indonesian state-owned enterprises rather than the central government. Data during the session showed the retail sales index fell 2.1% Y/Y.
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