Yields Fall As PBOC Injects Liquidity

2-year yields last down 0.5bps at 2.95%, 10-year yields last down 1.5bps to 3.26%, 30-year yields down 3bps to 3.80%. 5-year sector seeing some selling, yields up 2.2bps to 3.095%

• Elsewhere repo rates have fallen, the 7-day repo last down 1.5bps to 2.0507%, in November the rate briefly touched 2.5829% - the highest level since early March.
• The pull back in most yields comes from a near 18-month peak, market commentators say this is due to deleveraging in the financial system spurred by the economic recovery in China.
• The People's Bank of China (PBOC) injected CNY 60bn via 7-day reverse repos with rates unchanged at 2.2% on Tuesday. This resulted in a net injection of CNY 40bn given the maturity of CNY 20bn of reverse repos today, according to Wind Information.
• This equates to the first net injection into the system after five consecutive days of drains which withdrew a total of CNY 440bn according to MNI calculations, and CNY 300bn from the MLF rolled off in the same period. As a note, a further CNY 300bn of MLF matures next week on Dec. 16.
• Last week the PBOC unexpectedly injected CNY 200bn through the MLF facility, deviating from the standard mid-month operations. It is thought that the PBOC are likely to continue to use the MLF (which comes with a 2.95% interest rate) rather than reducing reserve requirements to add liquidity to the system, in a bid to control and reduce debt levels. The next scheduled MLF operation is Dec 15.