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Core Viewpoint - The People's Bank of China (PBOC) has resumed operations for buying and selling government bonds in the open market, signaling a potential easing of monetary policy and increased liquidity in the financial system [2][18]. Group 1: Central Bank Actions - The PBOC has gradually increased government bond transactions in its open market operations since the Central Financial Work Conference, aiming to enrich its monetary policy toolkit [2]. - In October 2024, the PBOC conducted net purchases of government bonds amounting to 200 billion yuan, indicating a proactive approach to managing liquidity [2]. - The central bank's actions are seen as a response to changing market conditions, particularly after a period of rising bond yields and declining bond prices [4][10]. Group 2: Market Impact - The resumption of bond buying is expected to stabilize market interest rates and create room for banks to lower deposit rates, which could alleviate pressure on borrowers [10][11]. - The 10-year government bond yield has increased from 1.64% to 1.84%, reflecting a shift in market dynamics and investor sentiment [4]. - The PBOC's bond buying is viewed as a confidence booster for the market, potentially reversing negative trends and encouraging investment [16][18]. Group 3: Economic Implications - The central bank's actions are anticipated to facilitate further interest rate cuts, with predictions of a 10 basis point reduction in the Loan Prime Rate (LPR) [10]. - The bond market's recovery could stimulate economic activity, particularly in the housing sector, by lowering borrowing costs for consumers [11][18]. - The PBOC's strategy is seen as a critical measure to enhance liquidity and support the overall economic environment amid fluctuating market conditions [16][18].