China onshore IRS are mixed with the curve flattening as short-ends rise on domestic liquidity concerns and long-ends fall on global growth concerns. The one-year IRS is up 4 bps at 2.50%-2.60%, and the five-year IRS is down 1 bp at 2.64%-2.74%; the one-to-five-year spread is 5 bps narrower at 14 bps. Traders are worried that liquidity conditions may face more pressure at the month-end as the PBOC didn't cut the reserve requirement ratio over the weekend. Also, five-year swaps are falling due to the ongoing European debut crisis. "It somehow feels like another little financial crisis just happened in Europe," says a Shanghai-based foreign bank trader.
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