Chinese interest rate swaps have........>

CHINA RATES: Chinese interest rate swaps have given back most of their early

gains which were triggered by the improvement in risk appetite following the

cooling of US-China trade tensions. The slight beat in the Caixin manufacturing

PMI (50.2 vs 50.1 exp) has also failed to have much impact. 

- The 2-year swap trades up 2.3bps at 2.83%, after failing to break above

short-term range highs at 2.85%.

- The improvement in US-China trade relations and the ongoing recovery in

Chinese stocks seem to make further PBOC easing less likely, suggesting rate

markets face upside risks. The short-term rolling correlation between Chinese

stocks and rates has collapsed in recent weeks but the positive longer term

correlation remains intact.