Core Viewpoint - The People's Bank of China (PBOC) announced adjustments to the evaluation method for primary dealers in the open market, effective from 2025, as part of the transformation of the monetary policy framework [1][2]. Group 1: Evaluation Method Adjustments - The new evaluation indicators emphasize the requirements for monetary policy transmission and significantly reduce the number of indicators [1]. - The evaluation now includes aspects such as "stable lending and reasonable pricing range" and "performance during periods of market tension" for the money market transmission [1]. - For the bond market making, the new indicators focus on "the number of bonds traded and reasonably quoted" and "performance during bond market volatility" [2]. Group 2: Compliance and Operational Standards - The evaluation emphasizes that primary dealers must not engage in illegal or non-compliant activities, with penalties for misconduct including suspension from trading qualifications [2]. - The 2025 list of primary dealers will remain unchanged, providing a transition period for institutions to adapt to the new evaluation criteria [2]. Group 3: Diversification and Fairness in Evaluation - The new evaluation method categorizes different types of institutions for assessment, promoting a more scientific and fair evaluation process [2]. - This adjustment aims to enhance the diversity of primary dealers, allowing various types of institutions to better support the central bank's macroeconomic regulation and policy transmission [2].

Core Viewpoint - The People's Bank of China (PBOC) announced adjustments to the evaluation methods for primary dealers in the open market, effective from 2025, with no changes to the dealer list for that year. This adjustment is part of the transformation of the monetary policy framework and aims to enhance the effectiveness of monetary policy transmission [1][2]. Group 1: Evaluation Method Adjustments - The new evaluation indicators emphasize the requirements for monetary policy transmission and significantly reduce the number of indicators, enhancing the importance of both money market transmission and bond market making [1]. - In the money market transmission aspect, the new indicators include "stable lending and reasonable pricing range" and "performance during periods of market stress," focusing on the volume, price, and coverage of lending, as well as stability during market fluctuations [1][2]. Group 2: Bond Market Making - For bond market making, the new evaluation indicators include "number of bonds traded and reasonably quoted" and "performance during bond market volatility," aligning with previous policy reports to establish a linkage mechanism between market makers and primary dealers [2]. - This adjustment aims to enhance the benchmark nature of the government bond yield curve and improve the transmission of interest rates from short to long [2]. Group 3: Compliance and Fairness - The new evaluation method emphasizes that primary dealers must not engage in illegal activities, with a focus on compliance and sound operational practices. Institutions with misconduct during the evaluation period will face suspension of their dealer qualifications [2]. - The evaluation will now categorize institutions for assessment, allowing for a more scientific and fair evaluation method, which is expected to diversify the types of dealers and better support the PBOC's macroeconomic regulation and policy transmission [2].

Core Viewpoint - The People's Bank of China (PBOC) announced adjustments to the evaluation methods for primary dealers in the open market, effective from 2025, with no changes to the dealer list for that year. This adjustment is part of the transformation of the monetary policy framework and aims to enhance the effectiveness of monetary policy transmission [1][2]. Group 1: Evaluation Method Adjustments - The new evaluation indicators emphasize the requirements for monetary policy transmission and significantly reduce the number of indicators, enhancing the importance of both money market transmission and bond market making [1]. - In the money market transmission aspect, the new indicators include "stable lending and reasonable pricing range" and "performance during periods of market stress," focusing on the volume, price, and coverage of lending, as well as stability during market fluctuations [1][2]. Group 2: Bond Market Making - For bond market making, the new evaluation indicators include "number of bonds traded and reasonably quoted" and "performance during periods of bond market volatility," which aligns with previous policy reports advocating for a linkage mechanism between market makers and primary dealers [2]. - This adjustment is expected to enhance the benchmark nature of the government bond yield curve and improve the transmission of interest rates from short to long [2]. Group 3: Compliance and Fairness - The new evaluation method emphasizes that primary dealers must not engage in illegal activities, with a focus on compliance and sound operational practices. Institutions with misconduct during the evaluation period will face suspension of their dealer qualifications [2]. - The evaluation will now categorize institutions for assessment, allowing for a more scientific and fair evaluation method, which is expected to promote diversity among primary dealers and better support the central bank's macroeconomic regulation and policy transmission [2].

Core Viewpoint - The People's Bank of China (PBOC) announced adjustments to the evaluation method for primary dealers in the open market, effective from 2025, marking a significant shift in the monetary policy framework [1][2]. Group 1: Evaluation Method Adjustments - The new evaluation indicators emphasize the transmission of monetary policy and significantly reduce the number of indicators, enhancing the importance of both money market transmission and bond market making [1]. - In the money market transmission aspect, the new indicators include "stability of lending and reasonable pricing range" and "performance during periods of market stress," focusing on the volume, price, and coverage of lending [1]. - For bond market making, the new indicators consist of "number of bonds traded and reasonably quoted" and "performance during bond market volatility," aligning with previous policy reports to strengthen the benchmark nature of the national debt yield curve [2]. Group 2: Compliance and Fairness - The new evaluation method stresses that primary dealers must not engage in illegal activities, with institutions exhibiting misconduct facing suspension of trading qualifications [2]. - The evaluation will now categorize institutions for assessment, making the evaluation method more scientific and fair, which is expected to enhance the diversity of primary dealers and better support the PBOC's macro-control and policy transmission [2]. - The list of primary dealers for 2025 will remain unchanged, providing a transition period for institutions to adapt to the new evaluation criteria [2].

Core Points - The People's Bank of China (PBOC) announced adjustments to the evaluation method for primary dealers in the open market, effective from 2025, with no changes to the dealer list for that year [1][2] - The adjustment is a significant part of the transformation of the monetary policy framework, with the evaluation indicators being updated to better align with market developments [1][2] Group 1: Evaluation Method Adjustments - The new evaluation indicators have been simplified to 4 categories and 7 items, emphasizing the importance of monetary policy transmission and bond market making [1][2] - The assessment of monetary market transmission includes stability in lending, reasonable pricing, and performance during periods of market volatility, guiding primary dealers to enhance their role in financial intermediation [1][2] Group 2: Bond Market Making - The evaluation of bond market making focuses on institutions' quoting, transaction conditions, and performance during bond market fluctuations, aligning with previous monetary policy reports [2] - The adjustments aim to enhance the benchmark nature of the government bond yield curve and improve the transmission of interest rates from short to long [2] Group 3: Compliance and Diversity - The revised evaluation emphasizes the importance of compliance, with institutions facing penalties for misconduct during the evaluation period [2] - The new method allows for differentiated assessments of various types of institutions, promoting diversity among primary dealers and supporting the central bank's macroeconomic regulation and policy transmission [2]

Core Viewpoint - The People's Bank of China announced adjustments to the evaluation method for primary dealers, effective from 2025, maintaining the current list of primary dealers for the year 2025, which serves as a transitional period [1][2]. Group 1: Evaluation Method Adjustments - The adjustment of the evaluation method is a crucial part of the transformation of the monetary policy framework, with the first establishment of primary dealers in 1996 and the evaluation mechanism introduced in 2004 [1]. - The new evaluation indicators have been streamlined to focus on four main categories and seven items, emphasizing the importance of monetary policy transmission and bond market making [1][2]. Group 2: Monetary Market and Bond Market Focus - In the monetary market transmission aspect, the evaluation will consider the stability of lending, reasonable pricing, and performance during periods of market volatility, guiding primary dealers to better facilitate capital flow [2]. - For the bond market making aspect, the evaluation will assess institutions' quoting and transaction performance, particularly during bond market fluctuations, enhancing the benchmark nature of government bond yield curves [2]. Group 3: Compliance and Diversification - The revised evaluation emphasizes that primary dealers must not engage in illegal activities, with institutions exhibiting misconduct facing suspension of dealer qualifications, thereby reinforcing discipline among dealers [2]. - The new evaluation method will implement differentiated assessments for various types of institutions, promoting diversity among primary dealers and enhancing their roles in supporting the central bank's macroeconomic regulation and policy transmission [3].

Core Viewpoint - The People's Bank of China (PBOC) announced adjustments to the evaluation method for primary dealers in the open market, effective from 2025, with no changes to the dealer list for that year [1][2] Group 1: Evaluation Method Adjustments - The adjustment of the evaluation method is a crucial part of the transformation of the monetary policy framework [1] - The new evaluation indicators have been simplified and emphasize the importance of monetary policy transmission and bond market making [1][2] - The evaluation will now include aspects such as "stability of lending and reasonable pricing range" and "performance during periods of market stress" for the money market [1][2] Group 2: Bond Market Making - New indicators for bond market making include "number of bonds traded and reasonably quoted" and "performance during periods of bond market volatility" [2] - This aligns with previous monetary policy reports that suggested establishing a linkage mechanism between market makers and primary dealers [2] Group 3: Compliance and Governance - The new evaluation method emphasizes compliance, stating that dealers must not engage in illegal activities, with penalties for misconduct including suspension from trading [2] - The evaluation will now categorize institutions for assessment, allowing for a more scientific and fair evaluation process, which may enhance the diversity of primary dealers [2]

Group 1 - The adjustment of the evaluation mechanism for primary dealers is a crucial part of the transformation of the monetary policy framework, with the People's Bank of China (PBOC) first establishing primary dealers in 1996 and implementing a regular evaluation system in 2004 [4] - The newly revised evaluation indicators emphasize the requirements for monetary policy transmission, significantly simplifying the number of indicators while enhancing the importance of both money market transmission and bond market making [4] - The evaluation mechanism maintains a focus on compliance and sound operational practices, with institutions exhibiting improper behavior during the evaluation period facing suspension of their dealer qualifications [5] Group 2 - The evaluation method is now more scientific and fair, categorizing different types of institutions for assessment, which helps to enhance the diversity of primary dealers and better support the central bank's macro-control and policy transmission [5] - The PBOC's adjustments to the evaluation indicators are designed to better serve the transformation of the monetary policy framework, reflecting the evolving needs of the market [4] - The 2025 primary dealer list will remain unchanged, providing a transition period for institutions to adapt and adjust to the new evaluation criteria [5]

Core Viewpoint - The monetary policy framework in China is transitioning from quantity-based control to a dual approach of quantity and price-based control, which is expected to enhance the pricing mechanism in the bond market and support the country's financial market opening [1][3][4]. Group 1: Transition of Monetary Policy Framework - The monetary policy framework is accelerating its shift towards price-based control as of 2024, establishing the 7-day reverse repurchase rate as the main policy rate [3][4]. - The People's Bank of China (PBOC) is narrowing the interest rate corridor and diversifying the monetary policy tools available, which will help in guiding the bond market towards reasonable pricing [4][8]. Group 2: Establishment of Key Policy Rates - As of July 2024, the PBOC has streamlined the policy interest rate system, designating the 7-day reverse repurchase rate as the primary policy rate, which will influence various market benchmark rates [4][5]. - The introduction of temporary reverse repurchase operations has established upper and lower limits for short-term interest rates, tightening the interest rate corridor to 70 basis points [7]. Group 3: Diversification of Monetary Base Channels - Since August 2024, the PBOC has initiated government bond trading and introduced the buyout reverse repurchase operation, enhancing the channels for monetary base injection and liquidity management [8][9]. - The buyout reverse repurchase tool, effective from October 2024, fills the maturity gap between the 7-day reverse repurchase and the 1-year Medium-term Lending Facility (MLF), allowing institutions to bid at different price levels [9][10]. Group 4: Impact on Bond Market Pricing - The establishment of the 7-day reverse repurchase rate and other short-term rates provides effective guidance for the pricing of short-term bonds, while the PBOC's bond trading operations influence long-term bond pricing [12][13]. - The transition in monetary policy is expected to correct irrational pricing in the bond market, as the PBOC actively engages in market communication to manage expectations [24][27]. Group 5: Future Outlook for the Bond Market - The bond market is anticipated to shift towards value investing, with a focus on coupon strategies as trading frictions remain constant, leading to a compression of yield spreads between active and non-active bonds [28]. - The PBOC's bond trading operations are expected to enhance the trading activity of certain maturities, similar to practices observed in other countries [28][30]. - The transition in monetary policy is also seen as a preparation for future interest rate hikes, allowing for better management of potential rate risks [29][31].

1. Market Data Summary Interest Rates - DRO01 closed at 1.37 with a 0.29bp increase; DR007 at 1.49 with a 5.00bp decrease; GC001 at 1.45 with a 16.50bp increase; GC007 at 1.59 with a 3.00bp increase; SHBOR 3M at 1.63 with a 0.10bp decrease; LPR 5-year at 3.50 with a 10.00bp decrease; 1-year treasury at 1.36 with a 0.99bp decrease; 5-year treasury at 1.51 with a 0.39bp decrease; 10-year treasury at 1.64 with a 0.32bp decrease; 10-year US treasury at 4.38 with no change [4] Stock Indexes - CSI 300 closed at 3847 with a 0.09% increase; SSE 50 at 2674 with a 0.31% increase; CSI 500 at 5640 with a 0.66% decrease; CSI 1000 at 6000 with a 0.80% decrease; IF current month at 3804 with a 0.2% increase; IH current month at 2637 with a 0.6% increase; IC current month at 5588 with a 0.5% decrease; IM current month with a 0.6% decrease [6] Trading Volume and Open Interest - IF trading volume was 93277 with a 20.6% decrease, open interest 213382 with a 12.2% decrease; IH trading volume 54538 with a 4.2% decrease, open interest 72451 with a 13.3% decrease; IC trading volume 95848 with a 9.5% decrease, open interest 208030 with a 8.7% decrease; IM trading volume 211961 with a 7.2% decrease, open interest 307602 with a 8.6% decrease [6] A-share Market - Last week, CSI 300 fell 0.45% to 3846.6, SSE 50 fell 0.1% to 2673.7, CSI 500 fell 1.75% to 5639.5, CSI 1000 fell 1.74% to 5999.6. Among Shenwan primary industry indexes, only banking (2.6%), communication (1.6%), and electronics (1%) rose, while textile and apparel (-5.1%), pharmaceutical biology (-4.4%), non-ferrous metals (-3.6%), social services (-3.3%), and agriculture, forestry, animal husbandry and fishery (-3.1%) led the decline. A-share daily trading volumes were 11575 billion yuan, 11524 billion yuan, 11390 billion yuan, 11920 billion yuan, 10153 billion yuan respectively, with the average daily trading volume decreasing by 1422.5 billion yuan compared to the previous week. As of June 19, A-share margin trading balance was 18154.6 billion yuan, an increase of 42.1 billion yuan from the previous week [6] Futures Contracts' Premium and Discount - IF premium/discount: current month expired, next month 15.42%, current quarter 0.02%, next quarter 5.35%; IH premium/discount: current month expired, next month 19.38%, current quarter 5.88%, next quarter 3.06%; IC premium/discount: current month expired, next month 12.72%, current quarter 11.31%, next quarter 9.69%; IM premium/discount: current month expired, next month 15.16%, current quarter 14.48%, next quarter 12.85% [8] 2. Central Bank Operations - Last week, the central bank conducted 960.3 billion yuan of reverse repurchase operations, with 858.2 billion yuan of reverse repurchase and 182 billion yuan of MLF maturing. So, the net withdrawal was 79.9 billion yuan. This week, 960.3 billion yuan of reverse repurchase will mature, with 242 billion yuan, 197.3 billion yuan, 156.3 billion yuan, 203.5 billion yuan, 161.2 billion yuan maturing from Monday to Friday respectively. Also, 100 billion yuan of treasury cash fixed deposit will mature on Monday [4][5] 3. Policy and Geopolitical Situation - The central bank governor said that in the past year, the central bank adhered to a prudent monetary policy stance, implemented multiple measures from multiple dimensions such as quantity, price, and structure to support economic recovery and maintain financial market stability. The central bank also worked on improving the monetary policy framework, and the transformation is an ongoing process that will be continuously evaluated and improved [5] - The Israel-Iran conflict continues to intensify, with the US attacking three Iranian nuclear facilities on June 21. Iran confirmed the attacks, and the Islamic Revolutionary Guard Corps vowed to strike US interests in the Middle East, and the Strait of Hormuz may be closed. Due to weak domestic fundamentals, policy vacuum, and intensified overseas geopolitical disturbances, the stock index is expected to be weak and volatile in the short term. Options can be used to hedge macro risks [7]