HALISTER1: Close CNH CGB Longs on Possible Auctions, CNH Sentiment: Nomura

Close CNH CGB Longs on Possible Auctions, CNH Sentiment: Nomura

(Bloomberg) -- Nomura closes its long 5-year CNH CGB position, given possible new CNH CGB auctions and CNH sentiment has deteriorated this week, Albert Leung, rates strategist, writes in note today.
  • While still positive on China’s fixed-income instruments, yield advantage of 5-year CNH CGBs over onshore bonds is less significant now as spread narrowed to 75 bps from 125 bps in March; NOTE: Yield on 3.4% CNH CGB due Nov. 2020 steady at 3.566%, while yield on 2.58% CNY CGB due April 2021 little changed at 2.70%
  • Positive carry remains on long CNH CGBs on FX-hedged basis: HK-based Leung; however, it’s also possible that latest deterioration in CNH sentiment feeds through to CNH assets, including CNH CGBs, especially with new CNH CGB supply (possibly around RMB15b) coming soon
  • Sees no clarity yet on exact timing of potential inclusion of CNH CGBs in major bond market indices
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Albert Leung (Nomura Holdings Inc)

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