CNY Swaps: Light 1-5y flow after strong GDP; RRR effect eyed

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Strong GDP data has failed to trigger paying in CNY NDIRS, and there was only light receiving in 1- and 5-year. 1s/10s NDIRS was flatter.

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  • Light 1-5y flow after strong GDP; RRR effect eyed


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Light 1-5y flow after strong GDP; RRR effect eyed

Official data released earlier today showed that first quarter GDP in China grew higher than the economists had forecast. It was up 4.5% year-on-year, compared to 2.9% of growth in the previous quarter or 4% of growth as had been predicted. Retail sales in March was up 5.8% year-on-year. The market had expected it to grow from 3.5% in February to 3.7%. Surveyed unemployment rate in the same month fell from 5.6% in February to 5.3%.


Despite stronger data and slightly higher fixings, there was limited paying interest in CNY NDIRS. A dealer reported 5-year trades at about 0.5bp lower of 2.83%, while 1-year went through down to 2bps lower of 2.385%. At time of writing both 1- and 5-year were about 3bps lower. 1s/10s NDIRS was 0.25bp flatter at 57.75bps.


A dealer reckoned the almost muted reaction to the data in the rates market was due to players still watching the effect of the PBOC lowering the RRR last month. “Unlike other countries, China is still working on reviving the economy after Covid, and some better data print doesn’t warrant any monetary tightening. Inflation is still low while unemployment is low, so there’s more work to be done,” the source explained, suggesting that players are waiting to see some good growth in inflation. The PBOC also left 1-year medium-term facility rate unchanged yesterday, indicating that the central bank has also been watching how the expanded money supply work on the economy.