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EGB/Gilt - Attention turns to the FOMC

     EXCLUSIVE: China is expected to unveil a package of tax cuts next year,
larger in scale than the CNY1.3 trillion seen in 2018, to boost the economy, a
top policy advisor at the Ministry of Finance told MNI in an exclusive interview
on Tuesday. At the same time, fiscal spending will be limited as the tax
reductions are implemented, Liu Shangxi, the director of the Research Institute
for Fiscal Science under the Finance Ministry, said in Beijing before a national
ceremony of China's 40th anniversary of reform and opening-up.  
     POLICY: China will continue to open up to the rest of the world, promote
globalization through supporting open and non-discriminatory multilateral trade
systems, and add new growth momentum through building on the One Belt, One Road
initiative, President Xi Jinping said. It will "resolutely" strengthen and
develop the state-owed economy while supporting and directing the development of
non-state sectors, Xi said in a speech in Beijing marking the 40th anniversary
of the country's reform and opening-up policy.
     LIQUIDITY: The People's Bank of China (PBOC) injected CNY140 billion via
seven-day reverse repos, and CNY40 billion through 14-day reverse repos today.
It resulted in a net injection of CNY180 billion in liquidity, as no reverse
repos mature today, according to Wind Information. The central bank has added
liquidity for a second day. It said this is to offset the impact of the taxation
period and other factors, and keep the liquidity in the banking system at a
reasonable and ample level.
     RATES: The 7-day weighted average interbank repo average rate for
depository institutions (DR007) decreased to 2.6898% from Monday's close of
2.7058%, Wind Information showed. The overnight repo average rose to 2.6634%
from Monday's 2.6192%.
     YUAN: The yuan appreciated to 6.8927 against the U.S. dollar from Monday's
close of 6.9004. The PBOC set the dollar/yuan central parity rate at 6.8854
Tuesday, as the yuan strengthened from Monday's 6.8908.
     BONDS: The yield on the benchmark 10-year China Government Bond was last at
3.3800%, up from the 3.3975% closing on Monday, according to Wind Information.
     STOCK: The benchmark Shanghai Composite Index fell 0.82% to 2,576.65, and
Hong Kong's Hang Seng Index dropped 1.05% to 25,814.25. 
     FROM THE PRESS: China should not give up its management of cross-border
capital flows, or directly intervene in the foreign exchange market when the
yuan exchange rate fluctuates greatly in the future, China Business News
reported, citing Yu Yongding, a member of the Chinese Academy of Social
Sciences. Financial regulators should vigorously push the development of the
derivatives market, so as to offer hedging tools for enterprises to avoid
exchange rate risk, the newspaper said citing Yu. The yuan still faces
short-term depreciation pressure, Yu added.
     China's National Development and Reform Commission is conducting a
feasibility study on interprovincial land transactions -- in effect, provinces
in need of more construction land will be allowed to purchase from other
provinces with abundant arable land. The move will be to help alleviate poverty
and promote economic development, the Economic Information Daily reported today,
citing insiders.
     China is still a developing country and will be for some time, based on the
current standards of any international organization, despite its economy
becoming the second-largest in the world, the People's Daily reported today,
citing Premier Li Keqiang. Li pledged that the government will continue to
deepen reforms, further expand the opening-up, create a fair business
environment, strictly protect intellectual property rights, while staying
committed to the development of an open economy, the daily said. China has both
the conditions and ability to cope with various risks and challenges,
maintaining stable economic growth, the newspaper added, citing Li.
--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
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