CNY Swaps: 10y price action flattens 1s/10s; Light front-end bid amid FX move

Rolled flat 21 Jun 2021
Losses in equities have prompted price actions in 10y NDIRS and 1s/10s flattened out. Weaker CNY has backed paying at the front-end of the curve.

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  • 10y price action flattens 1s/10s NDIRS

  • Front-end resists offers amid currency move


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10y price action flattens 1s/10s NDIRS

The PBOC sold CNY7bn in 7-day reverse repos at 2%, equivalent to draining a net CNY233bn from the system as there is CNY240bn worth of securities maturing today. Despite this massive draining of fund, the fixings fell for the fifth consecutive day, or by 15bps to 1.65%.


This has supported light receiving in CNY NDIRS although equities in China have been outperforming other markets on the selloff.


A dealer said trading has not been busy but there has been some clear price action at the long-end which subsequently drove a flattening of the curve. 1s/10s NDIRS, for example, is currently 2.5bps flatter at 59.5bps.



Light front-end bid amid currency move

The source said the flattening of the slope has also been backed by the front-end resisting receiving due to the currency move.


The CNY has been weakening against the USD since late last week. USD/CNY was fixed at 7.2472 today, up from 7.2197 on Wednesday and levels below 7.16 last week.


As such, there was light paying in the 1- to 2-year area around mid-day.


Another player reported 2-year flow at 2.11%, or about 1.5bps higher than those traded near market close on Wednesday. 1-year, on the other hand, went through about a basis point higher of 1.96%.