Investment Rating - The report does not explicitly provide an investment rating for the industry or specific assets. Core Insights - The report indicates a less urgent need for substantial policy easing in the near term, with June PMI surveys showing resilient economic momentum and Q2 real GDP growth tracking slightly above 5% [5] - The report suggests a gradual descent of the USD/CNY exchange rate, with a forecast of 6.90 for the USD/CNY spot in 12 months, implying limited total returns for long CNY positions against the USD [5] - The rates market is expected to continue short-term consolidation, with interest rates in China drifting lower over the medium term due to resilient economic growth and limited appetite for significant easing [6] Valuations and Policy Stance - The USD/CNY spot fell further in June, while the CNY depreciated modestly against the CFETS basket, indicating a shift in valuations [10] - The countercyclical factor widened in June, suggesting an appreciation bias in the USD/CNY fixing [17] Technicals - The carry-to-volatility ratio for USD/CNH and EUR/CNH remained largely unchanged in June, indicating stable market conditions [20] - Momentum to buy USD or EUR and sell CNH remained largely unchanged, reflecting consistent trading patterns [21] Fundamentals - China's trade balance rose in May, driven by a higher goods trade surplus, indicating strong export performance [32] - Long-term cash bond yields and NDIRS rates remained largely stable in June, suggesting a balanced outlook for bond markets [38] - The consensus forecast for CPI inflation edged down in June, while the forecast for real GDP growth edged up, reflecting a mixed economic outlook [56] Liquidity and Leverage - The PBOC injected liquidity into the interbank market in June primarily through pledged reverse repos, indicating active liquidity management [58] - Repo rates declined in early to mid-June before rising at the quarter-end due to seasonal liquidity demand, reflecting fluctuations in funding conditions [61] Bond Supply and Demand - Net issuance of central government bonds was around RMB 706 billion in June 2025, with the central government utilizing 51% of the annual issuance quota [69] - Local government general bond net issuance was around RMB 94 billion in June 2025, with local governments utilizing 56% of their general bond issuance quota [72]

06 Jun 2025 01:42:08 ET │ 35 pages Emerging Markets Strategy Weekly Big Beautiful EM CITI'S TAKE USD price action remains biased to the downside, which benefits EM. Tariffs-related issues may continue to cap the USD, as international structural positions calibrate their US asset allocations down. On the US rates front, implications are still negative for back-end USTs, with cautious international real money approach expected to continue. Local currency bond flows may continue to be supported by exogenous an ...

Key focus and themes Global Markets Research Foreign Exchange - Asia ex-Japan/Euro Area/Europe US 'exit' theme and our trades At what level of the 30-year yield (current:4.86%) do you expect to see the Fed respond? Fig. 1: Top five top-conviction strategy trades in order (scale 1-5) Note: Conviction scale: 1 – Watch; 2 – Watch Closely; 3 - Positioned @ 1/3 desired; 4 – Positioned @ 2/3 desired; 5 – Positioned @ 100% desired. Source: Nomura. Trump's 90-day partial tariff reprieve (announced 9 April) led to s ...