CNY Swaps: 1s/5s and 1s/10s steeper despite offers

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The 5- to 10-year area of the CNY NDIRS curve saw receiving, but 1s/5s and 1s/10s are steeper amid price action at the front-end.

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  • Strong trade and inflation data

  • Paying eases; 1s/5s and 1s/10s steeper despite offers

 

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Strong trade and inflation data

CNY NDIRS has eased off from further paying, which started early this week after an upside surprise from trade data over the weekend, and was further backed by sold inflation data.

 

China had CNY682.69bn worth of trade surplus in July, up from CNY650.11bn in June. The market had expected it to fall to CNY600bn.

 

Official data released yesterday showed that inflation in July was up 2.7% year-on-year, up from 2.5% although lower than economists’ forecast of 2.9%. PPI in the same month grew 4.2% on an annual basis, down from 6.1% in June and below consensus of 4.9%.

 

 

Paying eases; 1s/5s and 1s/10s steeper despite offers

CNY NDIRS had been well bid since the beginning of this week. 5- and 10-year swaps were paid up by more than 7bps over the past few sessions. 1s/10s NDIRS steepened up to its fresh high of about 63.5bps on Monday.

 

Paying interest faded today as recent uptrend in swap rates across the curve has become excessive, according to a dealer. As such, there has been some market correction from the belly of the curve. 10-year, for instance, is currently offered down 0.5bps at 2.59%.

 

Down the curve, 5-year traded between 2.43% and 2.44% on the day, with some of the trades in good size. These compared to yesterday’s close of 2.445%.

 

1s/10s and 1s/5s NDIRS are however 0.5bp to 0.75bp steeper at 45bps 60.25bps respectively, as a stronger yuan has prompted some price action at the front-end of the curve.

 

CNY strengthened against USD following weaker-than-expected US inflation data in overnight trading. 1-year NDIRS was offered down 2.5bps intraday as a result.