China's 10 year bond futures is off.....>

CHINA RATES: China's 10 year bond futures is off 17 ticks last as it tests (and

holds) the Jan 15 lows at 97.575. Below here would open up trendline support

from the Sep lows which comes in at 97.40. Cash yields have also edged higher by

0.8bps.

- Swap markets are showing some upside reversal potential, with the 10 year

adding 3bps to break back above the 3.0% level. The 2 year is up 1bp, taking out

its 21-dma to put the focus on the 2.6% level. 

- The upside pressure comes amid a liquidity drain from the PBOC, which skipped

OMO for the fifth straight day, resulting in a CNY770 billion withdrawal on the

week, perhaps suggesting that easing measures have been sufficient as the latest

0.5% reserve requirement ratio cut takes effect. 

- The ongoing recovery in the equity market, with the Hang Seng breaking out to

fresh cycle highs today, is putting increased pressure on rate markets.