USDCNH is seeing some upside pressure....>

CHINA YUAN: USDCNH is seeing some upside pressure following the PBOC fix,

trading at 6.9633, just shy of yesterday's high (and YTD high) of 6.9669. The

bullish trend is firmly intact following yesterday's break. 

- Chinese rates have edged higher today, closing their gap with the US. The

2-year interest rate swap spread now sits at 20.4bps down from a peak of 24.1bps

last week. However, this is coming amid renewed dollar safe-haven demand amid

falling US stocks, which is undermining US breakevens and keeping real yields

elevates. 

- It is also worth noting that China's 5-year CDS is up ~15bps this month,

testing July highs. While the CDS does not typically have a major impact on

USDCNH, a break above the July highs would be a warning sign that yuan weakness

is impacting credit risk.