J.P.Morgan Maintain Overweight Positioning In CGBs

J.P.Morgan note that "China rates tend to be more positively correlated with stock market movements when growth slows sharply or during periods of sharp changes in stock prices. The latest equity market correction itself is unlikely to be a direct catalyst for further PBoC easing, but markets could anticipate further headwinds to growth from lower business confidence and capex. Although the rally in CNY rates post-the RRR cut has largely eliminated any CGB cheapness along the curve, and tight liquidity conditions and already high leverage in the bond market point to higher odds of consolidation from here, we remain overweight CGBs and retain our long 5-Year CGB position as insurance against further deterioration in equity market sentiment."