Lacking Direction

The PBOC matched maturities with injections for the thirty fourth straight session, the last time the bank injected funds into the financial system was Feb 25. Repo rates are mixed, the overnight repo rate last at 1.9266 from highs of 2.14% yesterday, the 7-day repo rate last at 2.1581% after closing at 2.13% yesterday. Since the January liquidity crunch pre-LNY repo rates have hugged tight ranges and rarely approached levels that cause concern for policy makers.

• Futures are marginally higher having risen sharply at the open but retracing the initial jump. Some of the upside is attributed to a narrowing of corporate bond spreads. 5-Year spreads hit their tightest levels since mid-March. Some of the panic around Huarong is receding, while the chairman of the Shanxi State-owned Capital Operation said government in Shanxi province, China's top coal-producing region, won't allow any debt defaults by local SOE's.