MNI China Daily Summary: Monday, July 29

MNI: China CFETS Yuan Index Up 0.15% In Week of Jul 26

MNI: PBOC Net Injects CNY243.37 Bln via OMO Monday

MNI: PBOC Sets Yuan Parity Higher At 7.1316 Mon; -1.56% Y/Y

CHINA PBOC CONDUCTS CNY301.57 BILLION VIA 7-DAY REVERSE REPOS MON

CHINA SETS YUAN CENTRAL PARITY AT 7.1316 MON VS 7.1270

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EGBs-GILTS CASH CLOSE: Bunds Soar As ECB Takes Back Seat To US Bank Woes

BONDS
The German curve bull steepened sharply on ECB day, with the UK following suit but underperforming.
  • The ECB decision received a mixed reception. Bunds jumped with the 25bp hike vs some lingering expectations of 50bp, and a lack of firm commitment to further tightening in the statement.
  • More hawkish was Lagarde's "we are not pausing" and emphasis on requiring multiple future "decisions" to get to sufficiently restrictive territory; the announced end of APP reinvestments starting in July; and a lack of TLTRO bridging loans announced. Periphery spreads closed the day wider.
  • Ultimately though US banking concerns and related equity volatility had a much bigger impact, with Treasuries pulling Bunds and Gilts to session highs in a strong risk-off move.
  • Hike expectations faded, with ECB terminal dropping by 12bp and BoE 11bp - helping to drive short-end cash curve outperformance.
  • Focus early Friday will be on ECB speakers (Simkus and Elderson scheduled), with the US jobs report taking centre stage later.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is down 16.2bps at 2.479%, 5-Yr is down 12.3bps at 2.122%, 10-Yr is down 5.7bps at 2.19%, and 30-Yr is down 0.5bps at 2.366%.
  • UK: The 2-Yr yield is down 9bps at 3.678%, 5-Yr is down 8.7bps at 3.482%, 10-Yr is down 4.3bps at 3.653%, and 30-Yr is down 2.6bps at 4.069%.
  • Italian BTP spread up 6.1bps at 193.2bps / Spanish up 3bps at 109.8bps
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