CNY Swaps: 1-5y NDIRS bid after property rescue; Steeper 2s/5s to be short-lived

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The surprising property sector rescue plan triggered strong paying in the 1-5y zone of the CNY NDIRS curve. Steepening of 2s/5s would be short-lived.

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  • China releases property sector rescue plan; 1y bid fades

  • Steepening in 2s/5s NDIRS to be short-lived


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China releases property sector rescue plan; 1y bid fades

Property stocks in China spiked today, following a surprising policy move by the Chinese officials.


On Friday, the PBOC and the China Banking and Insurance Regulatory Commission jointly issued a notice to financial institutions that revealed 16 measures to address liquidity crisis in the property sector. Among these, there would be CNY1.3trn worth of injection into the sector, after the previous CNY250bn of bond sale programme support.


Market participants deemed the latest initiative as the most aggressive policy so far, and triggered thoughts about a possible end to the drag by this sector although it would take some time for it to recover. This has prompted some strong paying in the 1- to 5-year area of the CNY NDIRS curve since mid-morning domestic trading.


1-year NDIRS has been relatively busier with paying at up to 9bps higher of 2.185% after lunch break although it was last traded 0.5bp lower at 2.09%. 2-year, on the other hand, traded briefly at around 10bps higher near market close.



Steepening in 2s/5s NDIRS to be short-lived

Elsewhere, 5-year traded up to 13.5bps higher of 2.745% just minutes before market close, after some decent amount of paying in earlier trading.


The underperformance in 5-year saw 1s/5s and 2s/5s NDIRS steepening by 3.25bps and 2bps to 43.5bps and 37.5bps respectively. However, a trader said the steepening to the belly was more about a knee-jerk reaction to the news, and further steepening would require more concrete economic data in the next few months. As such, he forecast today’s steepening to be short-lived, and that 2s/5s NDIRS would quickly return to levels between 30bps and 35bps in the very near future.