Safe Assets Supported Again

The PBOC matched liquidity injections with maturities today, after a net drain of CNY 10bn yesterday. The overnight repo rate jumped at the open but has since receded to trade around unchanged levels, last at 1.7757%, the 7-day repo rate is slightly higher than yesterday's close at 2.0647%.

• Elsewhere, 10-year futures have gained for a second day, the contract rose around 45 ticks yesterday, and is up 16.5 ticks last at 96.945. The increase yesterday was attributed to PMI reports that showed manufacturing activity slowed.
• Cash yields are lower across the curve, some flattening seen. Yields also declined yesterday, reversing a move higher after the broad selloff amid a global bond rout last week.
• China's MOF will auction a total of CNY 114bn of sovereign debt across two lines tomorrow: CNY 57bn 3-year and CNY 57bn 7-year.
• Earlier on the session Chinese official hit the wires warning about leveraging and the possibility for asset bubbles. CBIRC said that China is working to reduce the level of leverage, risks in the financial system are controllable, and the government aims to stabilize the property market. It also mentioned the risks from bubbles in overseas markets and reiterated it would curb reckless capital expansion. The comments took the wind out of the sails of risk assets in China, and helped support bonds.