USDCNH is trading just off its daily highs....>

CHINA: USDCNH is trading just off its daily highs at 6.8721 as both local and

Hong Kong-listed stock indices continue their retreat, averaging ~1% down on the

day. 

- This equity and FX weakness has taken the momentum out of rate markets which

opened strong but have since given back some gains. The 2-year swap remains

0.5bps higher on the day though at 2.9350%, remaining above its 55-dma. 

- The 21-day correlation between 2-year swaps and CNHUSD has fallen to 0.59. The

21- day correlation between CNHUSD and the CSI300 has risen slightly to 0.18,

while the CSI300-2-year swap correlation remains flat.

- The continued outperformance of rate markets is unlikely to continue in the

absence of a surge in inflation, which was not evident in today's 2.3% y/y CPI

print.