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BOND SUMMARY

Gilts/Core EGBs Bid Ahead of BoE

EQUITIES

Muted Open, S&P Futures Parameters Unchanged

OPTIONS

Larger FX Option Pipeline

COMMODITIES

Oil Moderating, Futures Curve Still Strong

GLOBAL POLITICAL RISK

EU, France Ease Up On Vaccine IP After US States Support

     TOP NEWS: Combined profits at Chinese industrial companies rose 25.1%
year-on-year in October to CNY745.41 billion, the National Bureau of Statistics
said Monday. That compared with an increase of 27.7% y/y in September, the
highest since data on industrial profits became available in February 2012,
according to Wind Information. For the first 10 months of this year, total
profits rose 23.3% y/y to CNY6.25 trillion, 0.5 percentage point higher than the
22.8% gain in the January-September period.
     TOP NEWS: Assets and liabilities of Chinese banking institutions grew at a
slower pace in October, the China Banking Regulatory Commission said Monday.
Total assets increased 10.0% year-on-year to CNY241.58 trillion, while
liabilities rose 10.0% to CNY222.67 trillion, both the lowest year-on-year
monthly growth rates this year, the CBRC noted. Both assets and liabilities of
Chinese commercial banks alone increased 10.1% in October to CNY187.38 trillion
and CNY173.16 trillion, respectively, continuing a decline in momentum, the CBRC
said.
     RATES: The Ministry of Finance reopened and sold CNY26.4 billion in
five-year special government bonds at a yield of 3.8837% in an auction on
Monday. The yield was lower than the rate of 3.8857% that bonds with the same
maturity fetched in the secondary market on Friday. The bonds were first
auctioned on Sept. 19 with a coupon of 3.59%.
     RATES: Money market rates were mixed on Monday. The seven-day repo average
was last at 2.8668%, lower than Friday's average of 2.9387%. The overnight repo
average was at 2.8144%, higher than Friday's 2.7891%.
     LIQUIDITY: The People's Bank of China injected CNY70 billion in seven-day
reverse repos, CNY60 billion in 14-day reverse repos and CNY10 billion in 63-day
reverse repos via open-market operations. This resulted in no injection/drain
for the day, as a total of CNY140 billion in reverse repos matured on Monday. A
total of CNY950 billion in reverse repos mature this week. Liquidity is expected
to tighten in the interbank market this week due to cross-monthly factors.
     YUAN: The yuan weakened against the U.S. dollar after the People's Bank of
China set a weaker daily fixing. The yuan was last at 6.6063 against the U.S.
unit, compared with the official closing price of 6.6037 on Friday. The PBOC set
the yuan central parity rate against the U.S. dollar at 6.5874 on Monday, weaker
than Friday's 6.5810. It was the first weaker fixing after three straight
trading days of stronger fixings.
     BONDS: The yield on benchmark 10-year China government bonds was last at
3.9700%, up from the previous close of 3.9375%, according to Wind, a financial
data provider.
     STOCKS: Stocks were down, led lower by the non-ferrous metal sector. The
benchmark Shanghai Composite Index closed down 0.94% at 3,322.23. Hong Kong's
Hang Seng Index was 0.61% lower at 29,682.82.
     FROM THE PRESS: With monetary policy transitioning to price-dominated
management, the central bank's control of money market rates needs to be further
improved, the Financial News, a journal run by the People's Bank of China,
reported Monday on its front page. The duration structure of money market rates
needs to be reformed to better influence long-term rates, the report said,
citing analysts. The PBOC's monetary instruments have helped optimize the
benchmark yield curve and accelerate the transmission of monetary policy. The
expansion of the bond market and the reduction in the required reserve ratio
could also make bond rates and credit rates more sensitive to policy signals,
the report argued. The macro-prudential framework should include cross-border
capital flows in its macro-prudential assessments and strengthened controls of
the property market to allow for differential policies to respond to varying
situations among cities, the report said. (Financial News)
     The low growth of M2 money supply will not have a large negative influence
on the economy, and the importance of stabilizing liquidity and securitizing
financial sector risks has not changed, the People's Daily said in a commentary
Monday. The deceleration of M2 growth has been a result of financial
deleveraging and the movement of deposits out of instruments included in the M2
gauge as financial innovation has diversified savings options, the commentary
noted. Given the background of prudential monetary policy, a proper level of M2
will be maintained with the support of various policy tools, the commentary
argued, adding that the market should not overreact to the current level of the
M2 supply. (People's Daily)
     Regulators are expected to tighten controls on consumer loan asset-backed
securities as issuance of those instruments in the exchange market has surged by
five times in the past year, the Economic Information Daily reported Monday. The
new issuance of consumer loans this year has accounted for over 30% of total
newly issued asset-backed securities of CNY1 trillion as of Nov. 23, the report
said. But a large amount of these securities have been issued in the exchange
market, which means they are out of the control of authorities, the report
noted. This could trigger default risk due to a lack of transparency, poor risk
assessment as well as weak risk controls by issuers, the report warned.
(Economic Information Daily)
     The property market in China is undergoing a transition as controls on
property sales tighten and rental housing policy is pushed forward, Xinhua News
Agency reported Sunday. The toxic circle of "tighter controls, higher prices" is
expected to be broken because rising housing prices have been reined in,
policies to reduce inventories of unsold houses have worked, and financing
controls and the provision of new land for development have curbed speculation,
the report said. Half of residential housing problems in big cities can be
solved by housing purchases and half through rental housing, the report argued.
The emphasis on both housing purchases and rental housing will be a long-term
policy for the property market, the report said. (Xinhua)
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]