Risk reversals & implied vol. measures...>

CHINA YUAN: Risk reversals & implied vol. measures mimic what we have seen in

USD/CNH spot in recent weeks; narrow ranges & muted vol. USD/CNH 1-Month

25-delta risk reversals continue to hold in +ve territory, implying a marginal

preference for USD/CNH calls vs. puts. The metric has stuck to a narrow range

over the last couple of months, after turning -ve in late '18, briefly breaching

the '17 lows in January of this year. 3-Month 25-delta risk reversals have also

stuck to a tight range, although the measure failed to move into -ve territory

in the early part of this year. Also worth highlighting that USD/CNH 3-Month

implied vol. hovers around the lowest levels observed since late '17.

- The relatively neutral outlook painted by the aforementioned metrics shows

that the market remains cautious in terms of extrapolating the recent bounce in

Chinese economic indicators as a multi-month CNH positive. The marginal

preference for USD/CNH calls shows that participants remain wary of the ongoing

U.S.-China trade talks, and perhaps view the recent run of data as a "best case

scenario" that could be set to fade as the effects of targeted stimulus measures

& the LNY holiday fade.