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BOND SUMMARY

EGB/Gilt - Attention turns to the FOMC

EMERGING MARKETS

CZKPLN Approaching Key Resistance at 0.18

US TSY OPTIONS

Range in Underlying Spurring Vol Sales

     POLICY: If China's economy continues to slow in 2019, the government will
likely add stimulus via the property market, although deep reform to support the
private sector would be better for longer-term growth, a former senior
government advisor told MNI in an interview. "So far, there are no other drivers
for economic growth next year, so the authorities have to relax the strict
restrictions on the property market, such as tight control on credit, to buffer
the economic slowdown," said Yuan Gangming, former director of the Macro-economy
Research Institute of Chinese Academy of Social Sciences. (See full story:
https://www.marketnews.com/node/1843359)
     DATA: China's FX reserves increased by $8.6 billion to $3.06 trillion in
November, compared with $33.9 billion drop in October. The value of the total
reserves is still the second-lowest this year, up from October's low of $3.05
trillion, data released on Friday by the State Administration of Foreign
Exchange (SAFE) showed. The moderate gain in the price of foreign treasury bonds
drove up the valuation, according to SAFE.
     LIQUIDITY: The People's Bank of China (PBOC) skipped open market operations
(OMOs) for a 31st straight trading day Friday, leaving liquidity unchanged. No
reverse repos mature today, according to Wind Information. The central bank said
the level of liquidity in the banking system is "relatively high", after CNY100
billion  treasury cash deposits at commercial banks.
     RATE: The 7-day weighted average interbank repo rate for depository
institutions (DR007) increased to 2.5513% from Thursday's close of 2.4966%, Wind
Information showed. The overnight repo average decreased to 2.3861% from
Thursday's 2.4021%.
     YUAN: The yuan appreciated against the dollar, as USDCNY decreased to
6.8798 against Thursday's close of 6.8837. The PBOC set the dollar/yuan central
parity rate at 6.8664 Friday, weaker than Thursday's 6.8599.
     BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.3050%, down from the closing price of 3.2900% on Thursday, according to Wind
Information.
     STOCKS: The benchmark Shanghai Composite Index closed 0.03% higher at
2,605.89. Hong Kong's Hang Seng Index decreased 0.35% to 26,063.76.
     FROM THE PRESS: Chinese tech giant Huawei said in a letter to its global
suppliers that the actions undertaken by the U.S. government against one of its
executives won't change the relationships. The letter came after Huawei's CFO
was detained by Canadian police at the request of the U.S., The Beijing News
said Friday. Huawei said the U.S. government putting pressure on a commercial
company through various means is a departure from the spirit of free economy and
fair competition. The company again said it complies with all applicable laws
and regulations in the countries in which it operates, the newspaper reported.
(Link to the story: https://bit.ly/2E4Jf2l)
     It is both necessary and feasible for the deficit-to-GDP ratio to
moderately increase next year, which may help mitigate risks, China Securities
Journal said Friday in a front-page commentary. Expanding the fiscal deficit,
particularly by adding some local government implicit debt into the deficit,
will help control risks, the newspaper said. As China's economy will be facing
headwinds next year, expanding fiscal deficit is an important tool for
countercyclical adjustments and stabilizing growth, the newspaper said. (Link to
the story: https://bit.ly/2SvCSsM)
     From May to October, total CNY298 billion in VAT was reduced after China
implemented tax cuts, the Securities Daily said Friday, citing data by the State
Administration of Taxation. The manufacturing sector enjoyed the largest tax
cuts, totaling CNY71.45 billion, or 39.8% of the total, the daily said. The
administration also pledged to put forward policy proposals that reflect larger,
more substantial and extensive tax cuts as soon as possible, the daily said.
(Link to the story: https://bit.ly/2Qi6tcN)
--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]