Chinese 10-year bond futures remain.....>

CHINA RATES: Chinese 10-year bond futures remain on the front foot following

last week's solid gains, with the contract up 4 ticks at 96.98. 10-year cash

yields are down another 0.8bps today at 3.355%, narrowing the China-US spread to

29.4bps even as relatively dovish Fed comments on Friday keep US yields under

downside pressure. 

- While Chinese officials continue to stress that prudent monetary policy will

be maintained, traders are increasingly eyeing further easing measures, with

many expecting a RRR cut by year-end amid slowing economic activity and weak

credit growth.  

- Despite the drop in bond yields 10-year swaps continue to trade above their

recent lows, currently at 3.24%. 

- The divergence in price action between stocks and rate markets seen last week

suggests that equity markets may finally be responding positively to the PBOC's

increasingly dovish bias.