Liquidity Injection Latest Tool To Moderate Market Jitters

The PBOC injected a net CNY 20bn of liquidity into the financial system today, the first injection since the end of June. Repo rates have fallen as a result, the overnight repo rate at 1.6329% from highs above 2.10% yesterday, the 7-day repo rate down 26bps on the day at 2.2373% but still above the PBOC's rate. The moves comes after a rout of Chinese assets and several other attempts by officials to stem the wave of selling including soothing articles in state media and the CSRC meeting with banks.

• Risk sentiment has rebounded in China with equity markets up around 1.5% at the time of writing. A rising tide lifts all boats and Chinese bond futures are also higher, 10-year future up 14 ticks at 99.87. Bonds have been more resilient than other asset classes amid the recent rout of Chinese assets, boasting yield premiums, the expectation of further stimulus after the RRR cut earlier in July and lack of correlation with other bond markets, but had sold off in the past few days. Contract highs for the 10-year future are still within touching distance at 100.08.