Halister News

(Bloomberg) -- China highlighting fiscal support for economy signals there is limited room for further monetary easing and is negative for the bond market, according to Citic Securities.

• Depreciation pressure on yuan after G20 will also limit room for further monetary easing; bond market to see correction under liquidity pressure, head of fixed income research Ming Ming writes in note today
• NOTE: Xi and Obama agree China and U.S. will use monetary, fiscal and structural policy tools to boost confidence and strengthen growth, Xinhua reported Sunday
  • China will enhance two-way flexibility of exchange rate
  • Related: Bonds decline for third week as PBOC easing odds fade
• China’s efforts to strengthen fiscal support and step up structural reforms to cut overcapacity and reduce leverage are bearing fruit
• Heavy truck sales +45% y/y in Aug., a traditional off season, indicating demand in real economy may have picked up as fiscal spending supports infrastructure activity
• Yuan volatility may rise as Beijing looks to increase two- way flexibility
  • Yuan under depreciation pressure; Fed will probably still hike this year
• NOTE: Overnight repo rate rises 1 bp today to 2.0607%, highest since Tuesday
  • PBOC net drained 173.5b yuan in open mkt last week after net injecting for three weeks
  • Yield of 10-yr govt bond rises 2 bps to 2.8%