Strong Data and Lack Of Liquidity

The PBOC matched liquidity withdrawals with injections, the bank has not added funds on a net basis since Feb 25, and last week drained a net CNY 30bn. Repo rates have risen in response, overnight repo rate rises 13bps to 1.70% while the 7-day hits the highest since Feb 23 at 2.24%.

• Data over the weekend from China was strong, the trade surplus widened more than expected driven by bumper imports, indicating a global recovery in demand, while imports also rose, which bodes well for the domestic recovery. The figures have reignited the tightening rhetoric from PBOC watchers, despite the accommodative stance unveiled at the NPC last week.
• The strong data has also put China's bonds under pressure, though futures have come off worst levels with stock markets wiping out opening gains and dropping into negative territory.