MOF To Auction Two Lines

China's MOF is scheduled to hold two auctions today:

• CNY 57bn 3-year sale, results due after 0335GMT/1035HKT
• Upsized 7-year sale results due after 0400BST/1100HKT
• The MOF last sold 3-year debt on March 3, the sale drew a yield of 2.8412%, with a tail of 2.7bps, the sale was covered 2.98x with marginal cover at high yield 1.03.
• The MOF last sold 7-year debt on March 3, the sale drew a yield of 3.1878% with a tail of 40bps, the sale was covered 3.62x with marginal cover at the high yield of 1.74.
• Credit spreads in this maturity (3-7 years) have tightened slightly recently, as markets assess an expected increase in local bond issuance in April. A record CNY 7.1tn is expected this year, with expectations that April and June issuance could be up to four times higher than in Q1.
• Corporate bond sales have picked up, issuance from China's local state-run firms totaled CNY 1.96 trillion between January and March, up 23% from the previous quarter, increased corporate issuance could also see some upward pressure on yields. Chinese government bonds have remained resilient in the global bond rout though, and as such outperformed regional peers in Q1.