MNI BRIEF: China To Step Up Macroeconomic Policies - Politburo

MNI: PBOC Net Drains CNY51.03 Bln via OMO Tuesday

MNI: PBOC Sets Yuan Parity Higher At 7.1364 Tues; -1.28% Y/Y

CHINA PBOC CONDUCTS CNY216.27 BILLION VIA 7-DAY REVERSE REPOS TUES

CHINA SETS YUAN CENTRAL PARITY AT 7.1364 TUES VS 7.1316

MNI China Daily Summary: Monday, July 29

MNI: NORTH RHINE WESTPHALIA CPI +0.3% M/M, +2.3% Y/Y

MNI: GERMANY Q2 FLASH GDP  -0.1% Q/Q (+0.1% FCST, +0.2% PRIOR)

MNI: ITALY Q2 FLASH GDP  +0.2% Q/Q (+0.2% FCST, +0.3% PRIOR)

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

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Curves Flatter With Drivers At Both Ends

BONDS

Global cash curves are flatter in early Wednesday trade, with dovish short-term rate expectations being reconsidered, and the BoJ keeping a lid on long-end yields.

  • While the BoJ's decision to maintain the status quo on monetary policy - including maintaining the current yield curve control regime - was widely anticipated by analysts, the lack of a hawkish surprise saw a strong rally across global core FI.
  • 10Y JGB yields fell as much as 14bp and Tsys 9bp.
  • In Europe, stronger-than-expected UK CPI data and pushback by the ECB's Villeroy on yesterday's dovish Bloomberg sources piece saw near-term BoE and ECB hike pricing firming.
  • The Tsy curve has bull flattened, with Germany's twist flattening and the UK's modestly bear flattening. EGB periphery spreads are mixed.
  • Attention turns to US data (PPI, retail sales, industrial production) and Fed communications (Beige Book, Atlanta's Bostic, Dallas' Logan, St Louis' Bullard, Philly's Harker). We also get a $12B 20Y Tsy auction.

Latest levels:

  • Mar 10-Yr US Tsy futures (TY) up 9.5/32 at 114-31 (L: 114-16 / H: 115-04)
  • Mar Bund futures (RX) up 2 ticks at 139.28 (L: 138.97 / H: 139.99)
  • Mar Gilt futures (G) down 23 ticks at 104.22 (L: 103.97 / H: 104.97)
  • Italy / German 10-Yr spread 0.4bps wider at 180.5bps
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