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Large Bund downside

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After hitting fresh contract highs yesterday futures are lower today, yields also higher after declines in Monday's session. 10-Year future is down 7.5 ticks while 10-Year yield is up 0.8bps at 2.82%

The 10-Year yield fell to 2.8% on Monday, the lowest in over 12 months, as concerns over coronavirus cases combined with expectations of further easing measures from China. Bonds have gained for seven weeks in a row, the longest since the start of the US-China trade war in 2018.

  • Meanwhile repo rates are slightly higher but within yesterday's ranges. The overnight repo rate is at 1.8167% while the 7-day repo rate is at 1.90%. The PBOC injected CNY 10bn, matching maturities with injections.
  • Elsewhere China's financial authorities are expected to allow local governments to accelerate the sales of special bonds to back infrastructure projects and support economic growth from H2 to next year, the China Securities Journal reported citing analysts. Local governments may be able to use up the annual issuance quota of such bonds totaling CNY3.65 trillion, and this could deliver about CNY2.75 trillion yuan to infrastructure investment and add 3.9 pp in infra growth in 2021. With less than half of the annual quotas used in the first seven months, analysts expect new special bonds to peak in Q3, and continue with CNY1 trillion issued in Q4.