Core Viewpoint - The article discusses the impact of tariff measures on the bond market, highlighting a rapid decline in interest rates and the subsequent stabilization, while emphasizing the need to monitor external demand shocks and government debt issuance in May [1][2][3]. Group 1: Bond Market Overview - In April, following the implementation of tariff measures by the Trump administration, the stock market experienced a significant drop, leading to a rapid decline in long-term bond yields [2]. - The 10-year government bond yield remained stable around 1.65% during the latter part of April, reflecting market adjustments to external demand shocks and monetary policy expectations [2][3]. - The issuance of special government bonds has been confirmed, with net financing for government bonds in May expected to be around 623.4 billion, indicating a moderate level of financing activity [4]. Group 2: Liquidity and Monetary Policy - The liquidity gap in May is projected to be around 1500 billion, which is considered manageable, suggesting a continuation of a loose monetary environment [5]. - Despite the tariff-induced uncertainties, the central bank has not implemented significant monetary easing measures, maintaining a stance of "appropriate looseness" in monetary policy [6][7]. - The article anticipates that the central bank may prioritize a reserve requirement ratio cut in the second quarter, depending on external economic conditions [7]. Group 3: Credit Market Dynamics - In April, credit bond yields decreased, particularly in short-term bonds, with credit spreads for one-year bonds narrowing by up to 14 basis points [9]. - The article notes a shift in the yield curve, with the potential for long-term credit bonds to experience upward adjustments in yields [9][10]. - The analysis suggests that selecting 3-5 year credit bonds could yield higher returns, with estimated riding yields of 0.4% to 2% depending on the holding period [10]. Group 4: Interest Rate Trends - Recent trends indicate a decline in overnight funding rates, with the 7-day moving average of DR001 dropping to 1.65%, reflecting a 30 basis point decrease from previous highs [11]. - The article emphasizes the need for a supportive monetary environment to stimulate domestic demand, with expectations for short- to medium-term government bond yields to benefit from this liquidity [11][12]. - The current yield curve is described as relatively flat, with a higher probability of a steepening trend in the near future [12].

Core Viewpoint - The central bank's "loose monetary" signal is becoming clearer, and the liquidity remains balanced and loose. The issuance of special government bonds has begun, and the issuance of special bonds is accelerating, leading to increased government debt supply pressure in May [2][5] Group 1: Changes in Central Bank Attitude and Liquidity - In April, funding rates decreased, aligning closer to policy rates, with R007 and DR007 average monthly rates down by 19 basis points and 15.4 basis points to 1.77% and 1.72% respectively [6][7] - The central bank shifted from net absorption to net injection in mid-April, releasing supportive signals, with a net injection of 500 billion yuan through MLF in late April [7][10] - The 10-year government bond yield fell by 18.9 basis points to 1.62% by the end of April, reflecting a strong bond market amid rising expectations for loose monetary policy [10][19] Group 2: Government Debt Supply Pressure - In May, the issuance of ordinary government bonds is expected to reach 1.12 trillion yuan, with special long-term bonds at 227 billion yuan, totaling approximately 1.34 trillion yuan in government bonds, with a net financing scale of around 763 billion yuan [3][20] - Local government debt issuance is projected at 840 billion yuan in May, with a net financing scale of about 620 billion yuan, reflecting a significant increase in government debt supply [26] Group 3: Maintaining Loose Liquidity - The liquidity gap in May is estimated to be around 490 billion yuan, indicating increased pressure compared to April, primarily due to the significant rise in government debt net financing [4][36] - The central bank's proactive stance is evident with a slight increase in MLF maturity to 125 billion yuan and a decrease in reverse repo maturity to 900 billion yuan, suggesting a potential for maintaining balanced liquidity [4][36] - Historical trends indicate that May typically sees net fiscal spending, with an expected fiscal deficit of approximately 830 billion yuan, further influencing liquidity dynamics [28]

Report Summary 1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Core View of the Report The report predicts a 385.3 billion yuan liquidity gap in May 2025, mainly due to a significant month - on - month increase in government debt net financing. Despite the large gap, considering the central bank's positive attitude towards maintaining the money market, the money market interest rate is expected to remain loose in May. The DR007 central rate is expected to decline, driving down short - term bond yields [6][21][26]. 3. Summary by Relevant Catalogs 5 - Month Liquidity Gap Prediction Analysis - **Factor 1: Government Debt Issuance and Fund Allocation** - In May, the net financing scale of government debt is expected to increase significantly compared to April, with a potential impact on the money market. The estimated net financing scale of national debt in May is 609.3 billion yuan, a 343.6 - billion - yuan increase from April, and the proportion of ultra - long national debt issuance may rise. The estimated new local debt in May is 516.7 billion yuan, a 263.3 - billion - yuan increase from April. The total government debt supply scale in May may reach 1.13 trillion yuan, a 606.9 - billion - yuan increase from April [8][10]. - **Factor 2: Regular Fiscal Revenue and Expenditure** - Historically, May is usually a month of fiscal net expenditure, but the scale is small. Excluding the impact of "tax refund for excess input VAT" in 2022, the average net fiscal expenditure from 2020 - 2021 and 2023 - 2024 was 11.57 billion yuan, which is used to estimate the fiscal net income in May 2025 and will supplement the money market [14]. - **Factor 3: Credit Delivery** - May is not a peak month for credit delivery, so the impact on liquidity consumption is small. Given the improvement in credit delivery indicated by the increase in the six - month national and joint - stock bank bill transfer discount rate in late April and the high year - on - year growth rate of "deposits subject to reserve requirements" in March 2025, it is assumed that the growth rate will drop to 6.5% in May, and the required reserve for deposits will increase by 7.22 billion yuan, supplementing the corresponding liquidity [17][18]. - **Factor 4: Changes in M0 and Foreign Exchange Holdings** - After the May Day holiday, residents' cash flows back to the banking system, and historically, the M0 scale in May usually decreases month - on - month, supplementing 9.76 billion yuan of liquidity. The change in foreign exchange holdings in May is assumed to be the average of the previous three months, with a potential consumption of 6.39 billion yuan of liquidity [20]. - **Summary** - After comprehensive calculation of the above four factors, there is expected to be a 385.3 - billion - yuan liquidity gap in May 2025, mainly due to the significant month - on - month increase in government debt net financing [21]. Outlook on Short - Term Bonds - The central bank's positive attitude towards maintaining the money market can be observed from two aspects: the decline in the money market interest rate near the end of April, indicating low cross - month pressure; and the 50 - billion - yuan net MLF injection in April, a significant increase from before. - The Politburo meeting on April 25 proposed "timely reserve requirement ratio cuts and interest rate cuts" and other measures. It is expected that monetary policy will cooperate, the money market will remain loose, the DR007 central rate will decline, and short - term bond yields will follow suit [22][24][26].

Market Performance - A-shares declined, with the Shanghai Composite Index down 0.46% at 3335.75 points, and the Shenzhen Component Index down 0.97%[1] - The Hang Seng Index closed down 1.31% at 23119.58 points, while the Hang Seng Tech Index fell 2.03%[1] - European stock indices closed lower, while the Dow Jones increased by 1% and the S&P 500 rose by 0.55% to 5611.85 points[1] Economic Indicators - China's liquidity gap in April remains close to 3 trillion yuan, indicating ongoing liquidity issues[1][15] - The sales amount of China's top 100 real estate companies in March decreased by 11% year-on-year, reflecting weak recovery in the real estate sector[15] Policy and Market Expectations - President Trump is expected to announce details on reciprocal tariffs, which may impact inflation and market conditions[1][15] - The New York Fed President expressed concerns that tariffs could lead to rising inflation, indicating potential economic implications[15] Corporate Actions - JD Industrial has re-applied for a Hong Kong listing, aiming to raise approximately $1 billion (around 7.8 billion HKD) for expansion and strategic investments[13] - Jiangsu Hongxin's stock opened 46% higher but later fell back to the IPO price of 2.5 HKD, indicating volatility in market reception[13]

Core Viewpoint - The liquidity landscape has undergone significant adjustments since the beginning of the year, primarily due to the central bank's ongoing efforts to construct and refine a differentiated liquidity management system, leading to an expected "tight balance" in the funding environment moving forward [1][2]. Group 1: Central Bank's Liquidity Management - The central bank's monetary policy continues to follow a logic of dynamic balance among stabilizing the exchange rate, preventing risks, and promoting economic growth, maintaining an "appropriate easing" tone [2][3]. - The central bank is expected to use various monetary policy tools strategically, including potential interest rate cuts and reserve requirement ratio reductions, to support economic recovery and manage liquidity effectively [3]. Group 2: Banking Sector Challenges - The banking sector faces significant pressure on liabilities, particularly regarding long-term funding outflows, which is reflected in the divergence of funding rates and interbank certificate of deposit issuance rates [4]. - The improvement in the banking system's lending capacity is crucial for determining the recovery of the funding environment, with a focus on the lending indicators of joint-stock banks being more indicative than those of state-owned banks [4]. Group 3: April Liquidity Gap Observations - The liquidity gap in April is expected to widen compared to March, with government debt supply pressures remaining, and an estimated net financing of approximately 6 trillion yuan from government bonds [5]. - The fiscal revenue and expenditure gap for April is projected to be around 1.7 trillion yuan, indicating ongoing liquidity pressures despite a slight return of M0 [5]. Group 4: Market Outlook - The liquidity gap is anticipated to continue exerting pressure in the short term, while the central bank's easing stance may improve the odds of declining long-term bond rates [6].

Core Viewpoint - The recent tight balance of funds reflects several underlying issues, including a long-term negative growth rate in the loan-to-deposit ratio and significant demand from commercial banks for medium to long-term liabilities [1][2]. Group 1: Recent Funding Tightness - The funding rates have been high since the end of the holiday until the end of February, with rates exceeding the upper limit of the overnight reverse repurchase rate corridor [2]. - There is a persistent negative growth rate in the loan-to-deposit balance, with increasing differentiation in the deposit-raising capabilities of large and small banks [2]. - The issuance rates of negotiable certificates of deposit (NCD) for state-owned banks and city commercial banks have risen, leading to renewal pressures due to the narrowing interest rate spread [2]. Group 2: Central Bank's Monetary Policy - The central bank's recent "loose statement" and "steady operation" indicate a long-term "moderately loose" state, while short-term monetary tool operations require consideration of various factors [3]. - The central bank aims to maintain the "transmission efficiency" of monetary policy, with liquidity management potentially adjusting the curve shape [3]. - The central bank's medium to long-term liquidity provision is increasingly leaning towards buyout reverse repos, with a trend of shortening the duration of monetary tools [3]. Group 3: March Liquidity Outlook - The liquidity gap in March is expected to narrow significantly compared to January and February, with government debt net financing pressure easing [4]. - City commercial banks and joint-stock banks face the highest renewal pressure for certificates of deposit in the first quarter, which may keep issuance rates elevated [4]. - The central bank's liquidity provision strategy may lead to a structural "long money" gap, with a focus on the potential for a reserve requirement ratio (RRR) cut between the end of the first quarter and the beginning of the second quarter [5].

Core Viewpoint - The liquidity gap in March is expected to narrow significantly compared to February, indicating a potential marginal improvement in the funding environment, contingent on the central bank's stance and policy direction during the Two Sessions [1][4]. Group 1: March Liquidity Gap Observations - The overall net financing from government bonds in March is projected to be approximately 1,100 billion [2]. - The expected fiscal revenue and expenditure gap for March is around -1,200 billion [2]. - Excluding MLF and reverse repos, the liquidity gap is anticipated to decrease significantly from February, suggesting a potential marginal improvement in the funding situation [2][4]. Group 2: Bank Liability Pressure - There is considerable pressure on banks' liabilities, particularly due to the outflow of long-term funds, which cannot be fully resolved through market behavior alone and requires regulatory support [3]. - The cautious approach of the central bank in monetary policy may lead to a release of easing signals if the Two Sessions effectively boost market confidence and alleviate the rapid decline in long-term bond rates [3]. - Conversely, if the economic recovery does not show significant pressure, the central bank's focus may remain on stabilizing the exchange rate and preventing risks [3]. Group 3: Future Outlook - The liquidity situation in March will largely depend on the central bank's attitude, especially considering that fiscal expenditures typically occur at the end of the month and the ongoing pressure on bank liabilities [4]. - Continuous observation and tracking of the policy direction from the Two Sessions and the central bank's monetary policy usage in March are essential [4].

Core Viewpoint - Since the beginning of the year, the funding environment has remained tight, particularly with a noticeable increase in short-term interest rates. The article explores the remaining government debt supply for the first quarter, the liquidity gap in March, and whether the funding situation will improve [1][4]. Group 1: Funding Tightness - The funding environment has been tight since the start of 2025, with the central bank increasing the scale of reverse repos. Despite this, the pressure on liquidity has slightly eased from January to February, with a reduction in liquidity stratification [1][4]. - The central bank's operations included a resumption of 14-day reverse repos before the Spring Festival, while the scale of medium-term lending facility (MLF) continued to decrease. The buyout reverse repo operations have provided significant support for medium to long-term liquidity [5][6]. Group 2: Government Debt Supply - In March, it is estimated that the issuance of government bonds will reach approximately 1.4 trillion yuan, with a net financing scale of nearly 650 billion yuan after accounting for 712.2 billion yuan in maturing bonds. Local government bonds are expected to total around 1.3 trillion yuan, resulting in a combined net financing scale of over 1.8 trillion yuan for government debt [2][14]. Group 3: Liquidity Outlook - The liquidity gap in March is projected to be around 260 billion yuan, indicating some pressure on the funding environment. However, after the "Two Sessions," funding rates are expected to trend towards easing, with the central bank's net injection likely to increase marginally [3][19]. - The article suggests that the central bank may primarily use buyout reverse repos to supplement medium to long-term liquidity during the phase of increased government debt supply, which could lead to a decrease in funding rates, especially for short-term bonds [19].