It is going to be the busy week for Chinese data announcements as the series of data releases are scheduled as follows as follows:

8th March: Chinese Forex reserves and Balance of trade.

10th March: Chinese PPI, inflation rates (MoM) and FDI YTD.

11th March: Retail sales, Industrial production and Fixed asset investments.

China's FX reserves reduced by a lower-than-forecasted $28.6bn to $3.20tn in February of 2016, compared to a $99.5bn fall in January and a $107.9bn decline in December, the biggest on record. Reserves stayed at their lowest level since December 2011.

China trade surplus were at USD 63.29 billion in January of 2016, widening from USD 60.03 billion reported a year earlier and beating market consensus. It is the largest trade surplus on record, as exports and imports dropped far worse than forecasted.

January exports plunged by 11.2% YoY to USD 177.48 billion, following a 1.4% fall in December 2015.

Imports tumbled by 18.8% YoY to USD 114.19 billion, following a 7.6% decline in the preceding month, the 14th straight month of contraction, as a result of declining commodity prices and weak demand.

Elsewhere, FDIs in non financial sector in China increased by 3.2% to USD 14.1 billion in January of 2016 from the previous year.

But, foreign holdings of onshore CNY bonds (according to China bond statistics) dropped by CNY 49.6bn in January, bigger than the drop in August 2015 when China changed its CNY fixing mechanism.

Outflows have probably eased since then upon the stabilised CNY sentiment, but as with other Asian markets improvement in capital flows is unlikely in the near-term.

Nevertheless, foreign investors account for less than 2% of the market and should not have an impact on yields and rates. 1Y CNY IRS has tended to average below the benchmark probably due to spikes in the latter.

We expect 50bp cuts in the 7-day reverse repo and the market has not fully priced in this expectation.

We expect some further, mild downside to front end CNY IRS. We remain cautious against supply risks across the 5-10Y segment.