BUND TECHS: (M5) Monitoring Resistance

• The China securities journal published a positive piece on the relative success of regional governments and their efforts to refinance off balance sheet debts with interest rates on new bonds down by up to 2.5% and tenors of issuance out to 30 years. (source: MNI – Market News)
• Home Prices Stagnate in January as Lunar Holidays Impact.  New home prices in January fell by -0.07%, a modest improvement from the -0.08% in December. This represented the fifth consecutive month of improvement.  Used home prices fell -0.34%, a modest increase from -0.31% in December.   For used home prices, this halted a run of improving prices for four months. (source: MNI – Market News)
• Mainland Chinese investors risk appetite seems to be on the improve with $2.8bn of stocks purchases in Hong Kong Tuesday according to a BBG report.
• Despite the news of Hong Kong demand, the Hang Seng gave back today, down -0.28%, whilst the CSI 300 rose +0.39%, Shanghai +0.54% and Shenzhen +1.19%.
• CNY:    Yuan Reference Rate at 7.1705 Per USD; Estimate 7.2810
• Bonds:  after yesterday’s selloff, bonds had a better day today with the CGB 10YR lower by 1bp to 1.70%

• Tomorrow sees the fixing of the 1 and 5-year Loan Prime Rates.
• The 1-year is the reference rate for corporate loans and the 5-year the reference rate used by banks for mortgages.
• For a fourth straight month, we do not expect any change in the rates charged with the 1-year steady at 3.10% and the 5-year at 3.60%.
• Over the weekend the PBOC Governor indicated that easing of monetary policy can be expected as well as fiscal support.
• China’s top legislature begins its annual parliamentary meeting on March 5 where investors will wait to see how the recently set tone for the economy will translate into policy. 

JGB futures are slightly weaker and near session cheaps, -3 compared to settlement levels.

• The key local driver for the market was a speech by BoJ board member Takata. He reiterated that the central bank is in a position to adjust policy rates further if the outlook is met.
• He added that further policy adjustments should still in gradual (in the aftermath of the Jan hike), but noted such shifts need to be taken to avoid upside inflation risks (with the weaker yen and wage hikes a risk). The central bank is closer to achieving its inflation target as well. Monetary conditions remain easy Takata noted, even after the Jan hike.
• Cash US tsys are flat to 1bp richer in today’s Asia-Pac session.
• Cash JGBs have shifted from a modest bull-steepener earlier in the session to a mild bear-steepener, with yields now flat to 1bp higher across benchmarks. The benchmark 10-year yield is 1.2bp higher at 1.442% after hitting a fresh cycle high of 1.446%.
• Swap rates are 1-5bps higher, with the 20-year underperforming. Swap spreads are wider.
• Tomorrow, the local calendar will see weekly International Investment Flow data alongside the Auction for Enhanced-Liquidity 5-15.5-year.