Report Industry Investment Rating - Not provided in the given content Core View - Similar to the Bank of Japan, the Fed's bond - buying policy was initially a tool for liquidity adjustment. In 2008, the sub - prime mortgage crisis led to systemic financial risks and exhausted traditional interest - rate cut space, prompting the Fed to turn to QE. In 2020, the COVID - 19 outbreak restarted QE. In the short term, the impact of the QE policy on Treasury yields evolves more through investors' expectations, while in the long term, the US QE significantly affects long - term Treasury yields. Large - scale bond purchases provide liquidity to the financial market and drive down interest rates to some extent [1][66]. Summary by Different Stages First Stage (Before 2008): Traditional Monetary Policy Tool for Providing Liquidity - **Macro Background and Policy Objectives**: To meet the continuous expansionary demand for base money, the Fed used open - market operations (permanent and temporary) to control the money supply and influence interest rates. Asset purchases mainly supported currency issuance, while repurchase transactions smoothed liquidity disturbances [14][15]. - **Bond - buying Method**: One - way purchases in the primary and secondary markets. The Fed usually conducted weekly bond - buying operations in the secondary market through the SOMA. From 2004 - 2006, it carried out 40, 24, and 39 cash - bond transactions respectively, with average single - time increases of $1.28 billion, $1.04 billion, and $0.92 billion [20]. - **Impact on the Bond Market**: The Fed's bond - buying had a relatively limited impact on the bond market as its core goal was to limit the impact on normal market functions and the purchase scale was generally small. US Treasury yields were mainly determined by market expectations of future economic growth, inflation, and policy rates [38]. Second Stage (2008 - 2014): Quantitative Easing after the Sub - prime Mortgage Crisis - **Macro Background and Policy Objectives**: The 2008 sub - prime mortgage crisis led to a liquidity crisis. The Fed implemented QE to stabilize the financial and real - estate markets, lower long - term interest rates, and stimulate the economy by purchasing assets and expanding its balance sheet [39][40]. - **Bond - buying Method**: Continuous purchases in the secondary market. The QE process included three rounds and a twist operation. QE1 (2008.11 - 2010.3) had a total scale of $1.725 trillion; QE2 (2010.11 - 2011.6) involved buying $600 billion of long - term Treasuries; the twist operation (2011.9 - 2012.12) sold short - term Treasuries and bought an equal amount of long - term Treasuries; QE3 (2012.9 - 2014.10) was an open - ended plan. The Fed started tapering in 2013 [41][44]. - **Impact on the Bond Market**: The actual bond - buying operations had inconsistent effects on bond yields. After the QE policy was introduced, the bond market traded more based on investors' expectations. In the long run, the QE policy significantly reduced US bond yields. From October 2008 to October 2014, the yields of 1 - year and 10 - year Treasuries dropped by 124BP and 166BP respectively [47][48]. Third Stage (2015 - 2018): Difficult Exploration of Normalization - **Macro Background and Policy Objectives**: With the US economy's moderate recovery, the Fed aimed to exit the ultra - loose policy through passive balance - sheet reduction to avoid asset price bubbles and financial risks [49][50]. - **Bond - buying Method**: No reinvestment after bond maturity. The Fed raised interest rates 9 times from the end of 2015 to the end of 2018 and started QT in October 2017, gradually reducing its bond holdings [51][52]. - **Impact on the Bond Market**: After the QT policy was implemented, US Treasury yields continued to rise. It is believed that balance - sheet reduction increased Treasury yields as it meant less demand for US Treasuries and occurred during the late stage of the interest - rate hike cycle [55]. Fourth Stage (2019 - 2022): Unprecedented Response to the Pandemic - **Macro Background and Policy Objectives**: The COVID - 19 outbreak in 2020 led to an economic slowdown and market panic. The Fed launched an "unlimited QE" to start the crisis - response mode [56][57]. - **Bond - buying Method**: Unlimited QE - Taper - Balance - sheet reduction. The Fed cut interest rates to zero in March 2020, launched a $700 billion QE plan, and then an "unlimited QE". It started tapering in November 2021 and planned to end QE in mid - 2022. Balance - sheet reduction started in May 2022 [58][60][61]. - **Impact on the Bond Market**: After the "unlimited QE" was announced, US bond yields declined. However, due to factors such as investors' expectations and economic fluctuations, the ultimate impact of the Fed's bond - buying was limited. In 2022, the Fed's bond - buying failed to lower bond yields [63][65].

Core Viewpoint - The current economic situation in the U.S. is drawing parallels to the "Nixon era," with political pressure potentially forcing the Federal Reserve to adopt extreme measures like Yield Curve Control (YCC) [1][2][4]. Group 1: Political Pressure and Historical Parallels - U.S. Treasury Secretary Yellen has publicly criticized the Federal Reserve's quantitative easing, urging a return to its statutory mission of maintaining "moderate long-term interest rates" [2]. - Michael Hartnett, Chief Investment Strategist at Bank of America, notes that political pressure will likely drive the Fed to shift its policies, reminiscent of the Nixon administration's influence on monetary policy in the early 1970s [2][4]. - Historical context shows that during Nixon's presidency, significant monetary easing led to a decline in the federal funds rate from 9% to 3%, resulting in a devaluation of the dollar and a bull market in growth stocks [2][4]. Group 2: Yield Curve Control (YCC) as a Policy Tool - Hartnett predicts that in response to rising government financing costs, policymakers will resort to measures like Operation Twist, quantitative easing, and ultimately YCC [5][6]. - The global bond market is under significant pressure, with long-term yields in countries like the UK, France, and Japan reaching multi-decade highs, while the U.S. 30-year Treasury yield tested the psychological level of 5% [4][5]. Group 3: Investment Strategies - Hartnett recommends a clear trading strategy based on the anticipated implementation of YCC: going long on bonds, gold, and cryptocurrencies, while shorting the U.S. dollar [7][9]. - The expectation is that YCC will artificially lower bond yields, creating significant upside potential for bond prices as economic data shows signs of weakness [8]. - The strategy also includes a focus on gold and cryptocurrencies as hedges against currency devaluation, with a historical precedent indicating that such measures could lead to a 10% devaluation of the dollar [9][10]. Group 4: Long-term Risks - While the current trading environment may appear favorable, Hartnett warns of potential long-term risks, drawing parallels to the inflation and market crash that followed the Nixon-era monetary policies [10].

Group 1 - The U.S. Treasury market has shown remarkable resilience despite various pressures, including rising debt and aggressive tariff policies, unlike other countries' bond markets which have suffered due to fiscal concerns [1] - Year-to-date, the yield on 10-year U.S. Treasuries has decreased by over 0.3 percentage points, making it the only major bond market with a decline in 10-year yields [1][3] - The volatility of the U.S. bond market has been decreasing since April, with key volatility indicators nearing their lowest levels in three years [1] Group 2 - Recent data indicates a slowdown in job growth, which has contributed to a decline in 10-year Treasury yields, falling below 4.17% for the first time since early May [3] - Concerns regarding the independence of the Federal Reserve are reflected in rising inflation swap rates, which have reached a two-year high [5] - Despite concerns about the Fed's independence, U.S. bond investors have not shown significant alarm, allowing the Trump administration to breathe easier regarding the 10-year yield target [5] Group 3 - The U.S. Treasury Secretary hinted at limiting long-term bond issuance if buyer demand weakens, while data does not support claims of foreign capital fleeing U.S. assets, indicating strong demand for U.S. Treasuries [7] - The perception of the U.S. as a safe haven persists, with 5% being seen as a ceiling for 30-year Treasury yields, despite various challenges [8] - Market participants remain skeptical about the potential political influence on the Fed, with expectations that any new appointments will not drastically alter monetary policy [9] Group 4 - There is speculation that the White House may push the Fed to resume bond purchases, particularly long-term bonds, as a means to lower borrowing costs [10] - The current balance in the U.S. bond market is fragile, and without fiscal discipline from politicians, investors may express dissatisfaction through market actions [10] - The emergence of "bond vigilantes" in Europe and Japan could soon be mirrored in the U.S. if fiscal issues are not addressed [10]

Core Viewpoint - Gold prices have surged to new highs, driven by multiple factors including expectations of interest rate cuts by the Federal Reserve, ongoing geopolitical tensions, and increased central bank purchases of gold [1][7][9]. Price Movements - On September 2, London gold reached a peak of $3508.69 per ounce, the highest since April 22, while COMEX gold futures hit a record high of $3578.4 per ounce [2][4]. - As of the latest reports, London gold was trading at $3479.52 per ounce, reflecting a slight increase of 0.12% [2][3]. - COMEX gold futures also showed a minor increase, trading at $3549.9 per ounce, up 0.12% [4]. Market Drivers - The rise in gold prices is attributed to the market's renewed expectations for interest rate cuts by the Federal Reserve, following disappointing U.S. employment data and inflation figures that suggest room for monetary easing [8][9]. - Concerns over the independence of the Federal Reserve, particularly due to political pressures from the Trump administration, have also contributed to a weaker U.S. dollar, further supporting gold prices [8][9]. - Geopolitical risks, particularly the escalation of the Ukraine crisis, have heightened demand for gold as a safe-haven asset [8][9]. Future Outlook - Short-term risks of a significant pullback in gold prices are considered low, with ongoing support from interest rate cut expectations and geopolitical tensions [9][10]. - Long-term projections suggest that the evolving global political and economic landscape, along with challenges to the U.S. dollar's credit system, will continue to support gold prices [9][10]. - The potential for further monetary policy easing by the Federal Reserve, including the possibility of quantitative easing, could reinforce the upward trend in gold prices [10].

Core Points - The Federal Reserve maintains the Overnight Reverse Repurchase Agreement (RRP) as part of its open market operations, allowing non-bank entities to store cash in exchange for a set interest rate [1] - The usage of RRP peaked at $2.5 trillion at the end of 2022 but has since declined over 95% to a recent low of $22 billion [1] - The decline in RRP usage indicates a shift in liquidity management, with the U.S. Treasury issuing more short-term bonds to cover deficits, drawing funds away from RRP [3] Group 1 - The Federal Reserve still holds $3.3 trillion in reserves, down from a peak of $4.2 trillion in 2022, despite the reduced RRP usage [4] - The low RRP usage suggests that short-term interest rates will be more market-driven, potentially leading to greater volatility during tax payment periods and quarter-ends [5] - The depletion of RRP and the Treasury's bond issuance will directly consume bank reserves, which are crucial for market stability and the pace of the Fed's balance sheet reduction [5] Group 2 - The proposed "Fiscal Reserve Interest Accountability Act" could eliminate the Fed's ability to pay interest on reserves, potentially leading to a significant outflow of the $3.3 trillion in reserves back to the private market [6] - This legislative change may shift liquidity dynamics, favoring risk assets but could impair the Fed's ability to set short-term interest rates, increasing volatility during critical financial periods [7] - The current environment differs from the pre-2008 era, raising questions about the Fed's capacity to manage short-term rates without the ability to pay interest on reserves [6][7]

Core Viewpoint - The global equity markets have shown significant recovery and growth since the implementation of the 4.7 tariff policy, with an average increase of 24% post-policy compared to a 14% increase year-to-date, indicating a potential upward trend overcoming tariff-induced volatility [1]. Historical Bull Markets 1. 1991-2000: "New Economy" Driven Internet Bull Market - From early 1991 to March 2000, major global stock markets experienced continuous growth, with the Nasdaq index rising over 500% and significant gains in European and Japanese markets [2]. - The information technology revolution and the rise of "new economy" companies like Microsoft and Intel drove this growth, with the S&P 500's net profit growing at an average of 15% annually from 1995 to 2000 [2][5]. - The bull market ended in 2000 due to the bursting of the internet bubble and subsequent economic recession [5]. 2. 2003-2007: Globalization Dividend and Credit Expansion Bull Market - The global stock market rebounded from March 2003 to October 2007, with the S&P 500 rising approximately 90% and emerging markets seeing gains over 200% [6]. - Economic recovery in the U.S. and China's entry into the WTO fueled demand for commodities, leading to significant growth in resource-rich countries [6]. - The bull market concluded with the 2008 financial crisis, triggered by the subprime mortgage crisis and subsequent liquidity panic [6]. 3. 2009-2019: Long Bull Market Driven by Quantitative Easing (QE) - The bull market began in 2009, with a gradual recovery from the 2008 financial crisis, characterized by strong performance in technology, consumer, and healthcare sectors [9]. - Central banks' QE policies and low interest rates facilitated capital inflow into the stock market, with technology companies driving high profit growth [9]. - The bull market ended unexpectedly due to the global disruption caused by the COVID-19 pandemic in 2020 [9]. 4. 2022-Present: Economic Recovery and AI - The current market rally has been attributed to post-pandemic economic recovery and the emergence of AI technologies, with nearly 70% of S&P 500 companies exceeding earnings expectations in recent reports [11]. - The global liquidity environment has improved, with the Federal Reserve pausing interest rate hikes and the European Central Bank expected to lower rates in mid-2024 [13]. - The ongoing bull market is characterized by new industry drivers, a supportive monetary policy environment, and improving earnings and economic growth [13].

Core Insights - The survey indicates that fund managers are the most optimistic since February 2025, with a reduced probability of a hard landing and a historical low cash level of 3.9% in assets under management (AUM) [1][14]. Macro and Policy - 68% of respondents predict a soft landing for the economy, while only 5% are preparing for a hard landing [2][6]. - The global growth outlook remains weak, with a net -41% sentiment regarding economic strength [2]. - Optimism regarding interest rate cuts has reached its highest level since December 2024 [2]. Risks, Crowded Trades, and AI - Tail risks from trade wars/recession have decreased to 29%, while inflation risks and Federal Reserve inaction are at 27% and 20%, respectively [3]. - The perception of an AI bubble is mixed, with 52% of respondents believing there is no bubble, while 45% consider "longing the Magnificent Seven stocks" as the most crowded trade [3]. Asset Allocation - Global equity overweight has reached a net 14%, the highest since February 2025, with a shift of funds from the Eurozone to emerging markets [4]. - 91% of respondents believe U.S. stocks are overvalued, marking a historical high [4]. - There is a notable shift in allocations from healthcare to utilities, energy, and financial sectors [4]. Cryptocurrency and Gold - Only 9% of investors hold cryptocurrencies, with an average allocation of 3.2% [5]. - In contrast, 48% of investors hold gold, with an average allocation of 4.1% [5]. Contrarian Trading Strategies - The best contrarian long positions include U.S. cash, REITs, and healthcare, while the best short positions are in stocks, emerging markets, banks, and utilities [6].

Core Insights - The survey indicates that fund managers are the most optimistic since February 2025, with a reduced probability of a hard landing and a historical low cash allocation of 3.9% in assets under management (AUM) [1][15]. Macro and Policy - 68% of respondents predict a soft landing for the economy, while only 5% are preparing for a hard landing. The net global growth expectation remains weak at -41% [2]. - Optimism regarding interest rate cuts has reached its highest level since December 2024, with 54% believing the next Federal Reserve chair will implement quantitative easing (QE) or yield curve control (YCC) [2]. Risks, Crowded Trades, and AI - Tail risks from trade wars/recession have decreased to 29%, while inflation/Fed not cutting rates risks are at 27%. The risk of an AI bubble has risen to 14% [3]. - "Longing the Magnificent Seven stocks" is the most crowded trade at 45%, but 52% of respondents do not believe in an AI bubble, and 55% state that AI is enhancing productivity [3]. Asset Allocation - Global equity overweight has reached a net 14%, the highest since February 2025, with funds shifting from the Eurozone to emerging markets (overweight 37%) and Japan (underweight 2%) [4]. - 91% of respondents believe U.S. stocks are overvalued, marking a historical high, and there is a shift in funds from healthcare to utilities, energy, and financial sectors [4]. Cryptocurrency and Gold - Only 9% of investors hold cryptocurrencies, with an average allocation of 3.2%. For those excluding 75% who do not hold crypto, the exposure is 0.3% [5]. - 48% of investors hold gold, with an average allocation of 4.1%. Excluding 41% who do not hold gold, the overall exposure is 2.2% [5]. Contrarian Trading Strategies - Based on current fund manager positions, the best contrarian long positions are U.S. cash, REITs, and healthcare, while the best contrarian short positions are stocks, emerging markets, banks, and utilities [6].

Core Viewpoint - The article analyzes the recent volatility in the U.S. Treasury bond market following the announcement of "reciprocal tariffs" by the Trump administration, highlighting the challenges to the "safe asset" status of U.S. Treasuries and the potential risks involved in the bond market [1]. Group 1: Recent Market Volatility - Since the announcement of "reciprocal tariffs" on April 2, 2025, the U.S. Treasury market has experienced significant turbulence, leading to a questioning of its status as a safe haven [2]. - Despite market speculation about foreign investors selling off U.S. Treasuries, the overall demand from overseas remains strong, particularly for bonds with maturities of five years or less, as evidenced by a high bid-to-cover ratio in recent auctions [2]. - The limited scale of hedge fund basis trading and the stability in the repo market indicate that financial institutions are not under significant pressure, contrasting with the situation in March 2020 [3]. Group 2: Factors Influencing Treasury Yields - High tariffs are expected to increase inflation expectations, contributing to rising Treasury yields, with projections indicating a 1.8% increase in the U.S. price level due to tariff policies [6]. - The passage of the Trump tax cut plan is raising concerns about the sustainability of U.S. debt, with estimates suggesting that federal debt could exceed $40 trillion by 2028, leading to a debt-to-GDP ratio of 156% [7]. - The Federal Reserve's potential interest rate cuts in September 2025 may lead to a decline in short-term Treasury yields, while the need for large-scale bond issuance could create upward pressure on long-term yields [8]. Group 3: Supply and Demand Dynamics - The upcoming maturity of over $8.3 trillion in U.S. Treasuries from May to December 2025 may create short-term supply pressures, particularly affecting non-bank financial institutions [9]. - The shift in demand structure towards non-bank institutions is increasing market volatility and the risk of rising long-term rates, as these entities are more sensitive to changes in liquidity and risk perceptions [10]. - The potential for new regulations on stablecoins could create additional demand for U.S. Treasuries, with projections suggesting that the stablecoin market could reach $1.6 trillion by 2030 [11]. Group 4: Long-term Risks and Strategic Responses - The article highlights three long-term challenges facing U.S. Treasuries: the contradiction between declining U.S. power and excessive debt demand, the rising neutral interest rate, and the imbalance in fiscal revenue and expenditure [15][16]. - To mitigate risks, the article suggests that China should optimize its foreign exchange reserves and investment structure, gradually adjust its Treasury holdings, and enhance cross-border capital flow management [17][18].

Core Viewpoint - Long-term government bond yields in China have been declining, with the 30-year yield falling below 2.5%, reflecting expectations of long-term economic growth and inflation, while also being influenced by supply and demand factors [1][2]. Group 1 - The People's Bank of China (PBOC) maintains a positive long-term outlook on economic growth, asserting that the fundamental economic conditions remain favorable [1]. - Some institutional investors anticipate a moderate recovery in inflation from low levels, which could support an increase in long-term bond yields as nominal rates adjust to inflation [1]. - The bond market in China has made significant progress, ranking second globally in total size, but still requires improvements in market depth and pricing mechanisms [1]. Group 2 - A noticeable reduction in government bond supply this year may have contributed to the short-term divergence between bond yields and economic expectations [2]. - The PBOC's strong counter-cyclical monetary policy has created a favorable liquidity environment for the stable operation of the bond market [2]. - The issuance of ultra-long-term special government bonds is expected to alleviate the "asset shortage" situation, leading to a potential rebound in long-term bond yields [2]. Group 3 - The PBOC's engagement in secondary market bond trading serves as a liquidity management tool and a reserve for monetary policy [3]. - China's bond market ranks third globally, with improved liquidity facilitating the PBOC's operations in the secondary market [3]. - Unlike developed economies that resorted to large-scale bond purchases for monetary policy goals, China continues to implement normal monetary policy, distinguishing its approach from quantitative easing (QE) practices [3].