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CHINA: Yields Continue to Test Lower Despite Pledges To Stabilize/Support Mkts

CHINA
EM BulletAPACChinaEmerging Market NewsBulletMarketsFixed Income BulletsForeign Exchange Bullets
  • Various Chinese authorities have pledged to support the ailing economy through more effective fiscal policies and a focus on stability in the housing and equity markets.
  • China New Services reported over the weekend quotes from the Vice Minister of the Housing Ministry saying that ‘the government will promote the recovery of the property market through measures such as increasing demand and controlling the supply of land for new development.’ (as per BBG).
  • The Securities Regulatory Commission spoke of its intention to ‘enhance market monitoring for futures and spot trading, strengthen supervision of margin trading, derivatives and quantitative trading (as per SRC website)
  • The Ministry of Finance said that it intends to deliver more effective and sustained fiscal policies next year and well as improved macroeconomic regulations, whilst increasing the issuance of local government special bonds whilst expanding the areas in which they invest.
  • Whilst equity market weakness has been highly visible, the slow grind lower in yields may not have received the focus necessary as key technical levels were broken last week.
  • CGB 10YR finished the week at 1.78%, 14bps lower on the week.
  • For some time, market commentators had focused on 2.15% as a key level seen important to authorities.
  • The PBOC is known to be protective of the steepness of the curve and what it represents as a health check for the overall economy.
  • Some market observers interpreted the authorities comments on markets as suggesting that the potential for intervention to stop the grind lower in yields could be imminent.
  • Technical analysis of the TFTH5 future confirms the positive bias in place with the 20-day EMA above the 50-day EMA.
  • The CGB 10YR has ignored suggestions of intervention with a very strong open, the 10YR yield down -5.5bp at 1.726%
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  • Various Chinese authorities have pledged to support the ailing economy through more effective fiscal policies and a focus on stability in the housing and equity markets.
  • China New Services reported over the weekend quotes from the Vice Minister of the Housing Ministry saying that ‘the government will promote the recovery of the property market through measures such as increasing demand and controlling the supply of land for new development.’ (as per BBG).
  • The Securities Regulatory Commission spoke of its intention to ‘enhance market monitoring for futures and spot trading, strengthen supervision of margin trading, derivatives and quantitative trading (as per SRC website)
  • The Ministry of Finance said that it intends to deliver more effective and sustained fiscal policies next year and well as improved macroeconomic regulations, whilst increasing the issuance of local government special bonds whilst expanding the areas in which they invest.
  • Whilst equity market weakness has been highly visible, the slow grind lower in yields may not have received the focus necessary as key technical levels were broken last week.
  • CGB 10YR finished the week at 1.78%, 14bps lower on the week.
  • For some time, market commentators had focused on 2.15% as a key level seen important to authorities.
  • The PBOC is known to be protective of the steepness of the curve and what it represents as a health check for the overall economy.
  • Some market observers interpreted the authorities comments on markets as suggesting that the potential for intervention to stop the grind lower in yields could be imminent.
  • Technical analysis of the TFTH5 future confirms the positive bias in place with the 20-day EMA above the 50-day EMA.
  • The CGB 10YR has ignored suggestions of intervention with a very strong open, the 10YR yield down -5.5bp at 1.726%