Risk Off Tone

The PBOC matched maturities with injections, the thirty second straight session, the last time the bank injected funds into the financial system was Feb 25, the PBOC also drained CNY 6.1bn of liquidity at the MLF operations last week, letting a total CNY 156.1bn of MLF and TMLF loans roll off, and injecting CNY 150bn. Repo rates are higher, the overnight repo rate up 16bps at 1.8626% but down from 2.11% yesterday, the 7-day repo rate is 4.5bps lower at 2.1145%, below prevailing repo rate after dropping from above the level yesterday.

• Bond futures are higher, but off highs seen near the open. The general tone in the region is risk off with bonds supported and equity markets looking heavy.10-Year future up 2 ticks at 97.885, off highs at 97.965.
• Corporate debt took a hit overnight after a research report from Reorg that posited regulators are considering a restructuring for the firm's offshore arm that could result in losses for bondholders. A rebound in corporate debt markets had been cited as taking some of the shine off government securities. Repo rates are slightly lower, the overnight repo rate hovering around 1.7%, while the 7-day repo rate is back below 2.20%, which could also help support the sale. Huarong though reported that its offshore unit posted a profit in Q1 and said it had laid a solid foundation for recovery.