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Repo Rates Drop

CHINA RATES

Repo rates are lower today after rising for three consecutive sessions. The overnight repo rate is down 9bps at 2.0079%, while the 7-day repo rate is down 4bps at 2.1895% - back below the PBOC's 2.20% rate. The PBOC refrained from injecting liquidity again after rolling over the MLF and draining CNY 10bn via OMO's, speculation is rising that the central bank will soon inject liquidity, but the bank is expected to position these as a tool to smooth repo rate volatility rather than an easing signal. Futures are higher today, benefitting from lower repo rates and a decline in stocks with equity markets negative for the third straight session.

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