Midday Brief – China news dominates wires

The risk-on sentiment is improving as China announced the easing of COVID curbs, in quiet holiday marker conditions this news is really driving very ill-liquid markets.

Beijing judges the less serious threat that poses for international travel as early as January, as it lifts its borders to arrivals and also outbound flights globally.

News has broken that the US is to require travellers from China to show negative covert tests starting January 5. Japan, India, Malaysia, and Taiwan have announced stepped-up rules on travellers from China in response to rising cases.

Italy has ordered COVID-19 testing for all travellers coming from China. Milan’s main airport had already done so, from December 26, results showed almost one in two passengers was infected.

Some news reports are suggesting that it may still be too early to risk restrictions and that China is still hiding the full extent of COVID-19 in its country.

Chinese hospitals and funeral homes are under intense pressure as surging COVID-19 cases and deaths take their tolls on the resources in those industries.

Elsewhere, the Bank of Japan buys Japanese Government Bonds (JGBs) as part of its yield curve control program to maintain the loose monetary policy.

The BOJ buys JGBs in scheduled and unscheduled operations. Unscheduled buys are sometimes referred to as ’emergency’ bond buys. The Bank conducted an unscheduled operation yesterday and did so again this morning. After buying on Thursday morning BOJ bought more later in the Asia session.

Despite announcing the widening of the 10-year JGB band to +/- 0.5% the bank finds itself forced to continue to buy to defend yields. The widening of the band has encouraged traders to speculate that the Bank will be forced to lift the cap further or scrap it completely.