Core Insights - China's significant reduction of U.S. Treasury holdings in July 2025, amounting to approximately $25.7 billion, signals a critical shift in financial relations, as it coincides with a continuous increase in gold reserves, totaling about 74.02 million ounces [1][2] - The U.S. faces persistent fiscal challenges, including rising interest expenses and political gridlock, which exacerbate the situation and contribute to China's accelerated divestment from U.S. debt [3][4] - The recent diplomatic engagements between the U.S. and China, including a bipartisan congressional delegation visit, aim to stabilize market sentiment but may not address the underlying issues of trust and fiscal sustainability [2][3] Group 1: China's Actions - In July 2025, China reduced its U.S. Treasury holdings below $730 billion, marking a significant withdrawal from what was once considered a safe investment [1] - The increase in gold reserves and the reduction in U.S. debt holdings reflect a strategic shift away from reliance on the U.S. dollar, indicating a long-term reconfiguration of asset allocation [2][4] - China's actions are part of a systematic strategy to diversify its reserves and reduce dependency on the U.S. financial system, as evidenced by increased cross-border RMB payments and trade settlements [2][3] Group 2: U.S. Financial Landscape - The U.S. is experiencing a structural fiscal deficit, with rising interest payments and a lack of political consensus, which raises concerns about the sustainability of its financial policies [3][5] - The urgency of the U.S. to stabilize market conditions is evident, but the focus on short-term solutions may not suffice to rebuild long-term trust with China [4][5] - The market's reaction to these developments indicates a growing fear among investors regarding the stability of U.S. debt, as evidenced by fluctuations in bond yields following news of China's actions [4]

Political Instability - France is experiencing unprecedented political turmoil, with five prime ministers in less than two years, leading to governance issues and a fragmented political landscape [1][3] - The current prime minister, Le Cornu, faces significant challenges in passing the budget due to a divided parliament, which has resulted in a systemic paralysis of the government [3][10] Economic Concerns - France's public debt has surpassed €3 trillion, equating to 114% of GDP, with interest payments expected to reach €67 billion this year, exceeding the budgets of all government departments except for education and defense [3][4] - Rating agency Fitch has downgraded France's credit rating, increasing borrowing costs and raising concerns about fiscal sustainability [4] Social Unrest - A wave of protests has emerged, with unions mobilizing over 500,000 people against budget cuts perceived as unfair, particularly targeting welfare and education while the wealthy continue to benefit from tax breaks [6][7] - The protests have escalated into significant disruptions in public services, with one-sixth of teachers participating in strikes and power generation reduced by approximately 4,000 megawatts [6] Political Negotiations - The left-wing Socialist Party has seized the opportunity to demand significant budget changes, including halving budget cuts and introducing a 2% tax on wealth exceeding €100 million, creating a standoff with the right-wing and business associations [10] - The government must navigate a complex political landscape where satisfying one faction risks alienating another, making it difficult to pass the budget [10][11] Future Outlook - While some economists express cautious optimism about France's economic fundamentals, others warn of a potential collapse if political reforms are not enacted [11] - The ability of the government to break the budget deadlock and restore public confidence will be crucial in determining whether France can avoid becoming the "sick man of Europe" [11]

Market Performance - The US stock market experienced a decline on September 16, with all three major indices closing lower: Dow Jones down 0.27% at 45757.90 points, Nasdaq down 0.07% at 22333.96 points, and S&P 500 down 0.13% at 6606.76 points [1][3] - In contrast, Chinese assets performed well, with the Nasdaq China Golden Dragon Index rising 1.76%, reaching its highest level since February 2022 [1][3] Chinese Stocks - Popular Chinese stocks saw significant gains, with NIO rising over 8%, Baidu over 7%, JD.com and iQIYI over 3%, and Alibaba over 2% [1][3] Gold Market - International gold prices reached new highs, with London spot gold exceeding $3700 per ounce and COMEX gold futures approaching $3740 per ounce [5][6] - The recent surge in gold prices is attributed to three short-term catalysts: rising expectations for interest rate cuts by the Federal Reserve, increased pressure from President Trump on the Fed's monetary policy, and growing concerns over fiscal sustainability leading to a sell-off of long-term bonds [8] Federal Reserve Expectations - According to CME's "FedWatch," the probability of a 25 basis point rate cut this week is 96.1%, while the probability of a 50 basis point cut is 3.9% [8] - Looking ahead, Goldman Sachs forecasts that if the Fed's credibility is damaged, gold prices could soar to nearly $5000 per ounce as investors shift some of their US Treasury holdings into gold [8]

Core Viewpoint - The recent appointment of Indonesia's new finance minister has led to market volatility, with concerns over fiscal sustainability arising from aggressive fiscal policies aimed at stimulating the economy amid signs of economic fatigue [1][2]. Group 1: Market Reactions - The dismissal of the former finance minister, known for strict fiscal discipline, resulted in significant market reactions, including a 5 basis point increase in the yield of Indonesia's 10-year government bonds to 6.4% and a capital outflow of 14.24 trillion Indonesian rupiah (approximately 8.67 billion USD) within three days [2][3]. - The capital outflow included 6.57 trillion Indonesian rupiah from the central bank's securities and 5.45 trillion Indonesian rupiah from government bonds, indicating deep investor concerns regarding fiscal sustainability [2][3]. Group 2: Government Initiatives - In response to market turbulence, the Indonesian government announced a capital injection of 200 trillion Indonesian rupiah (approximately 121.8 billion USD) into several banks to encourage lending to the real economy and small and medium enterprises [2][3]. - The new finance minister emphasized that this liquidity support reflects a commitment to proactive fiscal expansion [3]. Group 3: Investor Sentiment - International investors have mixed views on Indonesia's bond market, with some asset management firms like BlackRock expressing optimism about long-term government bonds, while others, such as Fidelity and PIMCO, remain cautious, stressing the importance of fiscal discipline [4][5]. - The potential for capital inflows into Indonesian bonds may depend on the government's ability to maintain fiscal discipline and stabilize the exchange rate [4][5]. Group 4: Economic Indicators - Despite overall robust economic growth, signs of weakness are emerging, with a decline in the consumer confidence index and a slowdown in retail activity [7]. - The government has introduced a new economic stimulus plan to boost growth and support household consumption, funded by reallocating underutilized budget resources [7][8].

Report Industry Investment Rating The document does not provide the industry investment rating. Core Viewpoints of the Report - The central bank's bond purchase is approaching, which is conducive to the sustainability of fiscal expansion and may be implemented in Q4 or even October. - The early issuance of replacement bonds in Q4 is not the baseline expectation. If it happens, the probability of the central bank restarting bond purchases will increase. - The significance of the inflection point of social financing has declined, but the pressure on the fundamentals will gradually emerge, which will bring some support to the bond market. - At the current position, there is no need to be overly pessimistic about bonds. In the short - term, investors can play the rebound and wait for the central bank's bond purchase to be implemented later. [2][3] Summary According to the Directory 1. The central bank's bond purchase is conducive to the sustainability of fiscal expansion - The net supply of government bonds has been increasing, with a 3 - year compound growth rate of 24% from 2022 - 2025, and the proportion of bond interest payments in fiscal expenditure has reached 4.5% in 2024. Future government bond issuance is likely to remain high. - Commercial banks' ability to absorb government bonds has declined, leading to frequent "flying" in the primary issuance of government bonds this year. - Low - interest rates are crucial for fiscal sustainability. In Japan, lower interest rates have supported continuous fiscal expansion. In China, a 10BP increase in bond issuance interest rates in 2025 would increase fiscal interest payments by 22.6 billion, and a 10BP increase in the average cost of existing debt could lead to an increase in interest - payment costs of over 100 billion. [8][9][13] 2. The central bank's recent measures to improve bond market liquidity may be preparations before bond purchases - The second meeting of the joint working group of the Ministry of Finance and the central bank in early September is regarded as a signal for the central bank to restart bond purchases. - The central bank may want to improve the bond market infrastructure first to reduce the impact of its bond - buying behavior on the yield curve. - In July, the central bank proposed to cancel the freeze on collateral for bond repurchases, and on September 12, the China Central Depository & Clearing Co., Ltd. and the National Inter - bank Funding Center announced a centralized bond lending business, which may increase market liquidity. The central bank may restart bond purchases in Q4 or even October. [20][27][29] 3. The early issuance of replacement bonds in Q4 is not the baseline expectation. If it happens, the probability of the central bank restarting bond purchases will further increase - The statement of "pre - allocating part of the new local government debt quota for 2026 and using the debt - resolution quota earlier" does not necessarily mean the early issuance of 2 trillion replacement bonds in Q4. The new debt quota mentioned may refer to 80 billion of new local special bonds for debt resolution, and early allocation of this quota has been a common practice since 2019. - It is estimated that the average monthly net financing of government bonds in Q4 is about 633.5 billion. Unless there is a significant decrease in fiscal deposits in September, the early issuance of replacement bonds in Q4 is not the baseline expectation. Even if they are issued early, the central bank is likely to take measures to maintain liquidity, increasing the probability of bond purchases in Q4. [30][35][39] 4. The significance of the inflection point of social financing has declined, but the pressure on the fundamentals will gradually emerge - In August, the new social financing was 256.93 billion, slightly higher than expected but with a year - on - year decrease. Credit and government bonds were the main drags. The social financing growth rate dropped to 8.8%. - The significance of the social financing inflection point has decreased since 2021 due to the weakening impact of the real - estate cycle. However, the pressure on the fundamentals is increasing, as shown by weak export and inflation data in August and slow improvement in high - frequency data such as real - estate sales and construction - related indicators. This may support the bond market. [40][48] 5. At the current position, there is no need to be overly pessimistic about bonds. In the short - term, play the rebound and wait for the central bank's bond purchase to be implemented later - Although the bond market may face external disturbances such as the implementation of the redemption - fee new rule and the adjustment of the tax - exemption policy for public - fund dividends, after the 10 - year government bond yield reached 1.83%, panic has been largely released. - The large - scale buying by the allocation portfolio last week indicates that the interest rate may have reached the top. - It is recommended to play the short - term interest - rate rebound, keep a neutral position, and reserve funds for further investment. 3 - 5 - year policy - financial bonds and secondary bonds have increased in allocation value, while long - term bonds may be affected by the equity market and should be watched in the short - term. [49][52]

Core Viewpoint - The International Monetary Fund (IMF) has issued a clear warning regarding the medium-term fiscal sustainability of Romania, indicating that without further fiscal consolidation measures, public debt could rise to nearly 70% of GDP by 2030, with ongoing risks of sovereign credit rating downgrades [1][2]. Group 1: Economic Forecast - The IMF projects Romania's real GDP growth rate to be 1.0% in 2025, with a slight recovery to 1.4% in 2026 [1]. - The current economic outlook is characterized by dual risks of "downward growth and upward inflation" [1]. Group 2: Fiscal Policy Concerns - The IMF emphasizes concerns over the effective execution of Romania's fiscal consolidation plan for 2025-2026, which poses challenges to restoring market confidence [1]. - It is deemed "crucial" to implement medium-term fiscal consolidation and additional adjustment measures to rebuild fiscal sustainability and stabilize market expectations [1]. Group 3: Fiscal Deficit Projections - If the current reform plan is fully executed, Romania's fiscal deficit is expected to narrow to about 6% of GDP by 2026 [1]. - Without additional corrective measures, the budget deficit may only reduce to 5% of GDP by 2030, while public debt could rise to nearly 70% [1]. Group 4: Additional Fiscal Measures - To achieve more robust fiscal targets, the IMF suggests that Romania needs to implement additional fiscal consolidation measures equivalent to 0.67% of GDP annually starting in 2027 to bring the fiscal deficit below 3%, which is considered the safe threshold under EU fiscal rules [2]. - The IMF's statement does not disclose specific policy recommendations or directly evaluate the current stance of the Romanian government, but emphasizes that strengthening fiscal discipline and enhancing policy credibility are key to avoiding a deterioration in the debt trajectory and mitigating rating downgrade risks [2].

Core Viewpoint - International gold prices have surged nearly 40% this year, driven by central bank purchases and increased demand for safe-haven assets due to complex global situations [1][2] Group 1: Factors Influencing Gold Prices - The recent jump in gold prices since late August is linked to market speculation about a potential interest rate cut by the Federal Reserve and rising long-term bond yields in multiple countries due to fiscal sustainability concerns [1] - France's 10-year bond yield has risen significantly, surpassing levels in Greece and Spain, raising investor concerns about fiscal sustainability [1] - The UK’s 30-year bond yield reached a 27-year high due to investor sell-offs, reflecting worries about the UK government's fiscal situation and economic outlook [1][2] Group 2: Broader Trends in Bond and Gold Markets - The upward pressure on long-term bond yields is not isolated to the UK and France; countries like the US, Japan, and Germany are experiencing similar trends [2] - Investors are shifting from government bonds to gold, indicating a growing concern over government debt risks, which is prompting a re-evaluation of safe-haven assets [2] - The ongoing bull market for gold has lasted nearly three years, with prices continuing to reach new historical highs, suggesting further upward potential [2]

Group 1 - The core viewpoint is that international gold prices have surged nearly 40% this year, driven by central bank purchases, complex global situations, and increased demand for safe-haven assets [1][2] - The recent rise in gold prices since late August is linked to market speculation regarding a potential interest rate cut by the Federal Reserve and rising long-term bond yields due to concerns over fiscal sustainability in multiple countries [1][2] - France's 10-year bond yield has risen significantly, surpassing levels in Greece and Spain, raising investor concerns about fiscal sustainability [1] Group 2 - The upward pressure on long-term bond yields is not isolated to France and the UK; similar trends are observed in the US, Japan, and Germany, indicating a broader concern over government debt risks [2] - Investors are shifting from government bonds to gold, reflecting a growing apprehension about fiscal sustainability and the safety of traditional safe-haven assets [2] - The ongoing bull market in gold, which has lasted nearly three years, is supported by central bank purchases and geopolitical uncertainties, with the potential for further price increases as long-term bond sell-offs continue [2]

Summary of Key Points from the Conference Call Industry or Company Involved - The discussion primarily revolves around the global fiscal landscape, particularly focusing on developed economies such as the United States, Japan, Germany, and the European Union. Core Insights and Arguments - Political turbulence in multiple countries is closely linked to fiscal policies, with governments facing pressure to adjust their fiscal strategies due to declining public support [1][3] - The long-term and ultra-long-term interest rates in developed economies have risen significantly, indicating market pricing for potential fiscal expansion [1][4] - A collective fiscal expansion across multiple economies is anticipated in 2026, with significant stimulus measures expected from the US, Japan, Germany, and the EU [1][6] - The trend of de-globalization is increasing inflationary pressures and limiting monetary easing, making large-scale fiscal expansion a necessary response to economic downturns [1][7] - Political polarization poses challenges to timely implementation of fiscal policies, potentially destabilizing the bond market and reducing the effectiveness of fiscal expansion [1][8][9] - Structural issues in developed economies, such as Japan's aging population and Europe's investment shortfalls, limit the effectiveness of fiscal policies [1][10] Other Important but Possibly Overlooked Content - The US faces rapidly rising interest expenditures, which could strain fiscal sustainability, while Europe and Japan are constrained by mandatory social security expenditures [2][11] - The effectiveness of fiscal stimulus may be compromised by political polarization and the inability to convert fiscal measures into effective economic growth [1][8] - Gold is highlighted as a reliable safe-haven asset amid rising inflation concerns and fiscal expansion, with industrial metals also presenting potential investment opportunities in the near future [1][12]

Group 1 - The core viewpoint of the article emphasizes that the political situation in the UK is likely to have a more significant impact on the performance of the British pound than upcoming macroeconomic data [1] - Ebury strategist Matthew Ryan highlights that the focus is currently on political dynamics rather than macroeconomic developments [1] - The recent cabinet reshuffle by Prime Minister Starmer did not significantly affect the pound, primarily because Chancellor Reeves retained the position of Finance Minister [1] Group 2 - Investors are expected to remain anxious ahead of the autumn budget announcement on November 26, where tax increases are almost certain [1]