TF Securities(SH:601162) Tianfeng Securities·2025-07-23 11:13Investment Rating - The industry investment rating is maintained at "Outperform" [4][50]. Core Insights - The introduction of government bond trading aims to diversify monetary policy tools and manage liquidity, with a long-term focus on reducing reliance on reserve requirement ratio cuts and broad-based refinancing tools [5][11]. - The government bond trading operations have not achieved the intended goal of steepening the yield curve, instead accelerating the decline of broad interest rates, leading to a situation where the 1-year government bond yield fell below 1% by December 2024 [5][25]. - The resumption of government bond trading is unlikely in the short term due to high interest rate risks among rural commercial banks, which may lead to significant losses if long-term bonds are aggressively purchased [5][44]. Summary by Sections Government Bond Trading Launch and Suspension - Government bond trading was officially launched in August 2024 but was suspended in January 2025 due to persistent supply-demand imbalances in the government bond market [5][28]. - The trading was intended to serve as a channel for basic currency issuance and liquidity management, with operations primarily involving "buying short and selling long" [5][16]. Reasons for Launch - The long-term need to shift the basic currency issuance method from relying on reserve requirement cuts to government bond trading is emphasized [11][12]. - The central government's increasing leverage necessitates coordination with monetary policy to alleviate liquidity pressures and stabilize issuance costs [11][12]. Impact on Monetary Policy - The operations have significantly influenced the central bank's balance sheet, particularly affecting the "government debt" and "other deposits" categories [20][21]. - The rapid decline in interest rates during the trading period has raised concerns about the effectiveness of the government bond trading tool [25][29]. Conditions for Resumption - The resumption of government bond trading is contingent upon three main conditions: monitoring the bond market's operational status, observing changes in government bond yields, and assessing market supply-demand conditions [31][32][43]. - The current liquidity pressure is manageable, and the necessity for resumption is low, especially with the anticipated government bond net financing pressure being controllable in Q3 2025 [43][44].