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Societe Generale note that they "expect differentiated volatility across the curve (i.e. lower vol in the long end vs larger vol at the front end) to prevail. At these levels, we believe a sell-off at the front end is overdone and that short-dated CNY bond yields are likely to stabilise with a downside bias. In our view, concerns about PBoC tightening and heavy foreign bond positioning at the front end, could cause greater volatility at the front end. The market became fearful that the PBoC's increasing vigilance regarding asset bubbles (property and equity) could translate into earlier monetary tightening. In addition, following the inclusion of two major bond indices', foreign bond demand turned out to be quite strong particularly at the front end, in our opinion. We think that the recent foreign bond inflows could be largely aimed at FX gains (i.e., a stronger CNY vs the USD). Such FX-oriented bond trades tend to react more to market developments than typical hold-to-maturity-type trades at the front end. Hence, the market repercussion to the liquidity drainage was more volatile than in the usual cases. Nevertheless, the renewed dynamics in foreign bond positioning is unlikely to translate into an earlier PBoC tightening yet, in our opinion."