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Futures In China Slide Most Since August As Liquidity Drained

ASIA RATES
  • INDIA: As expected the RBI kept rates on hold, citing the need to safeguard the recovery, the split was 5-1 the same as at the August meeting. In the opening part of his speech RBI Governor Das was positive on the economy saying the recovery had gained momentum and noted that the inflation trajectory is more favourable. The Central Bank cut inflation projections for the current fiscal year to 5.3%, which saw bonds recover early losses, Das said the Bank is committed to gradually bringing down inflation. The RBI discontinued its GSAP operation saying it had been successful, but was no longer necessary. Also noted that the appetite for variable rate reverse repos was enthusiastic.
  • SOUTH KOREA: Futures higher in South Korea, shrugging off a move lower in UST's after progress on the US debt ceiling impasse. Vice FinMin Lee said that South Korea plans to take active actions to stabilise inflation as price growth is expected to accelerate in the near term, CPI next month is forecast at 2.5% due to a negative base effect, compared to 2.2% in September; the BoK has a 2% inflation target. A more active response is needed (to stabilize inflation) in the fourth quarter as on top of the base effect, uncertainty remains high due to rising oil prices, global supply chain disruptions and global inflation risks," Lee said. Markets look ahead to the BoK rate announcement next week, consensus is for no change, though the November meeting could be live. The spread between US and South Korea 2-Year yields has narrowed, last at 105.37bps, the lowest level since mid-July.
  • CHINA: PBOC sold 10b yuan of 7-day reverse repurchase agreements at the usual rate of 2.2%, draining a net CNY 330bnbn. Leading up to the Golden Week holiday the Central Bank had been injecting between CNY 100bn and CNY 120bn each day in order to ensure liquidity heading into quarter end, while uncertainty around Evergrande also likely increased the need for liquidity. Repo rates are broadly stable and holding around recent averages. As a reminder approximately CNY 1 trillion of policy loans, including MLF, are due next week. Futures have dropped sharply, the 10-Year future enduring the biggest one day slide since August.
  • INDONESIA: Yields higher across the curve, move focused in the belly. Indonesia's consumer confidence gauge compiled by Danareksa Research Institute improved to 76.4 in September from 71.2 prior. Bank Indonesia released their own consumer confidence index, which rose to 95.5 in September from 77.3 prior. FinMin Indrawati said Thursday that the tax revenue is projected to reach 9.2% of GDP next year and 10.1% of GDP in 2025 after the adoption of a major overhaul of Indonesia's tax law. Key changes include a higher VAT rate and a new top income tax bracket.
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