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Futures Hit Contract High

CHINA RATES

The PBOC matched injections with maturities today, repo rates are higher but significantly lower than highs seen this week. The overnight repo rate up 3.2bps at 2.022%, this week's high at 2.20%, while the seven day repo rate is at 2.11% from highs of 2.25% earlier this week. Futures climbed from the open, playing catch up with some gains in UST's, while Chinese equity markets are also lower. The 10-year future is up 0.20 at 98.025, a fresh contract high.

  • Elsewhere, China will continue its strong effort to cut capacities of high-polluting industries and strictly control high energy-consuming and high-emission projects, said Vice Premier Han Zheng on Tuesday during his tour at China Research Academy of Environmental Sciences. China must stay committed to realizing carbon neutrality with a clear timetable and roadmap and build a clean, low-carbon, safe and efficient energy system. MNI previously reported that the government may boost coal production to tame skyrocketing prices while controlling the domestic steel production to reach emission controls.
  • Markets look ahead to LPR announcement tomorrow. Consensus is for no change, Citi's own estimate is in line with this: "Citi Economics believes though monetary policy tightening is ongoing, the PBoC will keep the policy rate – 1-year MLF rate unchanged this year. As it is referenced to the MLF rate, the one-year LPR will likely remain at 3.85% in May and the five-year LPR rate will likely remain at 4.65%." The highlight today is CNY 80bn of supply in 2- & 5-year bonds.

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