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CHINA: Yields Off Earlier Highs, USD/CNH Supported Sub 7.3500, Equities Lower

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China government bond yields remain in positive territory, but away from earlier highs. Gains have been biased at the front end, with the 2yr yield holding +6bps higher at this stage, above 1.18%. the 5-30yr benchmarks are around 1-2bps higher. The high in the 10yr yield was 1.684%, last near 1.67% (per BBG). In the swap space, the 2yr NDIRS was last around 1.47%, against earlier highs of 1.50%, the 10yr was last near 1.555%. 

  • Earlier yield momentum was fueled by headlines that the PBoC would halt bond purchases, given the current demand/supply backdrop has heavily favored lower yields. Onshore media also highlighted a PBoC backed story that the market should over-interpret the central bank's easing bias.
  • These yield moves aided CNH but follow through has been limited. USD/CNH was last near 7.3500, little changed for the session. US-CH yield differentials are lower at the front end, with 2yr spread, back close to +300bps, against late Dec 2024 highs near +330bps.
  • In the equity space, sentiment continues to struggle, the CSI 300 tracking down around 0.50%, but still above YTD lows (based off intra-day levels). Property related indices have struggled since the start of the year, with elevated debt levels still a headwind.
  • Next Monday we get a fresh update on the trade picture, with Dec figures. Exports are expected to be firmer in y/y terms, front loading ahead of potential US tariffs in 2025 may be a support.
  • Also note on Jan 14 (next Tuesday), a briefing will be held at 3pm local time from the PBoC and SAFE on financial support for the economy. 
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China government bond yields remain in positive territory, but away from earlier highs. Gains have been biased at the front end, with the 2yr yield holding +6bps higher at this stage, above 1.18%. the 5-30yr benchmarks are around 1-2bps higher. The high in the 10yr yield was 1.684%, last near 1.67% (per BBG). In the swap space, the 2yr NDIRS was last around 1.47%, against earlier highs of 1.50%, the 10yr was last near 1.555%. 

  • Earlier yield momentum was fueled by headlines that the PBoC would halt bond purchases, given the current demand/supply backdrop has heavily favored lower yields. Onshore media also highlighted a PBoC backed story that the market should over-interpret the central bank's easing bias.
  • These yield moves aided CNH but follow through has been limited. USD/CNH was last near 7.3500, little changed for the session. US-CH yield differentials are lower at the front end, with 2yr spread, back close to +300bps, against late Dec 2024 highs near +330bps.
  • In the equity space, sentiment continues to struggle, the CSI 300 tracking down around 0.50%, but still above YTD lows (based off intra-day levels). Property related indices have struggled since the start of the year, with elevated debt levels still a headwind.
  • Next Monday we get a fresh update on the trade picture, with Dec figures. Exports are expected to be firmer in y/y terms, front loading ahead of potential US tariffs in 2025 may be a support.
  • Also note on Jan 14 (next Tuesday), a briefing will be held at 3pm local time from the PBoC and SAFE on financial support for the economy.