HALISTER1: China 7-Day Repo Rate May Stay Above 2.5% After Holiday: Guangfa

China 7-Day Repo Rate May Stay Above 2.5% After Holiday: Guangfa

(Bloomberg) -- China’s 7-day repo rate may remain above 2.5% even as it declines after the week-long National Day holidays, Guangfa Bank trader Yan Yan says.
  • Liquidity is tighter due to seasonal and holiday factors
    • Settlement of 7-day repo contracts will be after the holidays, which also boosts 7-day repo rate
  • Carry has been narrow as 7-day repo rate is very close to 10-yr govt bond yield; further trading strategy relies on economic data
    • Sept. PMI would be a early indicator for upcoming 3Q data
  • NOTE: Sept. Caixin China Manufacturing PMI due 9:45 am Friday, Bloomberg survey median est. 50.1 vs 50 in Aug.
    • 7-day repo rate jumps 12 bps to 2.7453% today, highest since July 2015; yield of 10-yr govt bond rises 2 bps to 2.75%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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