📝See Further Downside In CGB Yields: OCBC

PBoC net withdrew CNY231.6bn of liquidity via OMOs this morning upon heavy maturities; nevertheless, part of the 7-day liquidity has been replaced by 14-day liquidity to cover quarter-end and the holiday thereafter. The CGB curve steepened during early trading this morning thus far, in line with our bias. The 10Y CGB yield is consolidating around the 2% level; sustained recovery in the overall risk sentiment is probably required to put a floor to yields. Market would look for fiscal support, in additional to monetary policy support. At the short end, our view has been for short-end repo-IRS to partially catch up with CGB yields as they had lagged in the downward move. 1Y repo-IRS has fallen by a cumulative 11bps this week; we still see some further downside from here. NCD rates edged lower over recent days, while implied CNY rates went higher, narrowing potential asset swap pick-up.-OCBC