Summary of Conference Call Notes Industry Overview - The focus is on the Chinese government bond market, specifically the 10-year treasury bonds and their yield performance [1][2][3]. Key Points and Arguments 1. **Resistance Levels for Bond Yields** - The 10-year treasury bond yield is facing strong resistance around 1.6%, with previous dips reaching approximately 1.57% [1][2]. - Current yields are fluctuating between 1.65% and 1.7%, indicating limited adjustment space [1][2]. - Investors are advised to consider buying when yields approach 1.65% but to be cautious of potential pullbacks near 1.6% [1][2]. 2. **Expectations for Resuming Bond Trading** - Market expectations for the resumption of government bond trading need to be postponed [3][4]. - The central bank requires two conditions to be met: an increase in bond supply and favorable yield conditions [4]. - There is no significant increase in bond supply expected in July, with only minor peaks anticipated in August and November [4]. 3. **Central Bank's Stance on Yield Movements** - The central bank is more inclined to accept rising yields rather than significant declines, which pose systemic risks [5]. - To avoid breaching critical levels like 1.6%, the central bank may wait for the market to adjust to higher levels before considering resumption of trading [5]. 4. **Liquidity Management and Central Bank Operations** - The notion of "liquidity withdrawal" when treasury bonds mature is inaccurate; central bank purchases actually inject liquidity into the system [6][7]. - The process of purchasing bonds involves a two-step operation that ultimately increases liquidity, although maturity payments do not directly affect base currency and liquidity [7]. 5. **Interest Rate Cut Potential** - The central bank's capacity for interest rate cuts this year is limited, with a potential cut of about 10 basis points expected around late Q3 or early Q4 [8]. - The timing of any cuts will depend on external conditions, with the focus on stabilizing growth in response to economic pressures [8]. 6. **Current Market Liquidity Conditions** - The market is experiencing marginal tightening of liquidity, with the central bank maintaining a relatively loose stance but with limits [9][10]. - The seven-day repo rate is around 1.5%, and the overnight repo rate is approximately 1.4%, indicating controlled liquidity to prevent fund misallocation [9][10]. 7. **Impact of Interbank Leverage on Market Rates** - High interbank leverage is currently observed, with a 0.3% increase in leverage for every 10 basis points recovery in yields [12]. - The current high leverage levels make further increases challenging without a drop in short-term rates [12]. 8. **Future Market Outlook** - The bond market is expected to face strong resistance at the 1.6% level, with significant attention needed on the U.S.-China trade tensions and economic fundamentals [13]. - Economic pressures in Q3, particularly in consumption and exports, could lead to a decline in bond yields if conditions worsen [13]. Other Important Insights - The central bank's preference for currency depreciation over appreciation indicates a strategic approach to managing economic stability [5]. - The discussion highlights the importance of monitoring external factors, such as trade relations and economic indicators, which could significantly impact the bond market dynamics [13].

1. Report Industry Investment Rating No information provided in the content. 2. Core View of the Report In March 2025, the leverage ratio of the inter - bank bond market increased month - on - month but was slightly lower than the historical average. The total bond custody scale of China Central Depository & Clearing Co., Ltd. (CCDC) and Shanghai Clearing House increased. Different institutions had different investment preferences for various bond types, with commercial banks significantly increasing their allocation of interest - rate bonds and broad - based funds increasing their allocation of inter - bank certificates of deposit [1][2][4]. 3. Summary According to the Directory 3.1 Bank - Inter Leverage Ratio: Up Month - on - Month, Lower than the Same Period in Previous Years At the end of March, the inter - bank bond market leverage ratio was 107.03%, up 0.8 pct from 106.23% at the end of the previous month, and slightly lower than the historical average [1][12]. 3.2 Custody Data Overview In March 2025, the total bond custody scale of CCDC and Shanghai Clearing House was 166.22 trillion yuan, a month - on - month increase of 2655.6 billion yuan. CCDC's custody scale increased by 1308.9 billion yuan, and Shanghai Clearing House's increased by 1346.7 billion yuan. Treasury bonds, local government bonds, policy - bank bonds, medium - term notes, and inter - bank certificates of deposit contributed to the increase, while enterprise bonds, short - term financing bonds, and private placement notes contributed to the decrease [2][15]. 3.3 By Bond Type: Net Financing of Treasury Bonds and Inter - bank Certificates of Deposit Increased, Credit Bonds Had Net Repayment - **Interest - rate Bonds**: In March 2025, the total custody scale of major interest - rate bonds was 109.14 trillion yuan, a month - on - month increase of 1584.1 billion yuan. Commercial banks and broad - based funds were the main buyers, increasing their holdings by 814.8 billion yuan and 401.4 billion yuan respectively. For treasury bonds, commercial banks were the main buyers; for policy - bank bonds, broad - based funds were the main buyers; for local government bonds, commercial banks and broad - based funds increased their holdings [3][17][48]. - **Credit Bonds**: The total custody scale of major credit bonds was 15.54 trillion yuan, a month - on - month decrease of 1.01 billion yuan. Broad - based funds and commercial banks increased their holdings. For enterprise bonds, all institutions reduced their holdings; for medium - term notes, commercial banks were the main buyers; for short - term financing bonds, broad - based funds were the main buyers; for ultra - short - term financing bonds, multiple institutions reduced their holdings [3][29][48]. - **Inter - bank Certificates of Deposit**: The custody scale was 21.18 trillion yuan, a month - on - month increase of 1115 billion yuan. Broad - based funds were the main buyers, increasing their holdings by 1306.6 billion yuan, while commercial banks were the main sellers, reducing their holdings by 264.8 billion yuan [3][45][48]. 3.4 By Institution: Commercial Banks Significantly Increased Allocation of Interest - rate Bonds, Broad - based Funds Increased Allocation of Inter - bank Certificates of Deposit - **Commercial Banks**: The custody scale of major bonds was 80.04 trillion yuan, a month - on - month increase of 561.1 billion yuan. They increased their holdings of interest - rate bonds and credit bonds by 814.8 billion yuan and 11.1 billion yuan respectively, and reduced their holdings of inter - bank certificates of deposit by 264.8 billion yuan. They increased their allocation of treasury bonds and local government bonds in interest - rate bonds and medium - term notes in credit bonds [4][49]. - **Broad - based Funds**: The custody scale of major bonds was 35.53 trillion yuan, a month - on - month increase of 1729.7 billion yuan. They increased their holdings of interest - rate bonds, credit bonds, and inter - bank certificates of deposit by 401.4 billion yuan, 21.8 billion yuan, and 1306.6 billion yuan respectively. They increased their allocation of local government bonds, treasury bonds, and policy - bank bonds in interest - rate bonds and medium - term notes and short - term financing bonds in credit bonds [4][49]. - **Overseas Institutions**: The custody scale of major bonds was 4.20 trillion yuan, a month - on - month increase of 146.5 billion yuan. They increased their holdings of interest - rate bonds, inter - bank certificates of deposit, and credit bonds by 3.2 billion yuan, 141.1 billion yuan, and 2.2 billion yuan respectively. They mainly increased their allocation of treasury bonds in interest - rate bonds and slightly increased their allocation of medium - term notes, short - term financing bonds, and ultra - short - term financing bonds in credit bonds [4][53]. - **Insurance Institutions**: The custody scale of major bonds was 4.03 trillion yuan, a month - on - month increase of 93.5 billion yuan. They increased their holdings of interest - rate bonds and inter - bank certificates of deposit by 93.1 billion yuan and 1.3 billion yuan respectively, and reduced their holdings of credit bonds by 1 billion yuan. They mainly increased their allocation of local government bonds and treasury bonds in interest - rate bonds and slightly reduced their allocation of medium - term notes and enterprise bonds in credit bonds [4][53]. - **Securities Companies**: The custody scale of major bonds was 2.76 trillion yuan, a month - on - month increase of 118.1 billion yuan. They increased their holdings of interest - rate bonds, credit bonds, and inter - bank certificates of deposit by 88.7 billion yuan, 3.3 billion yuan, and 26.1 billion yuan respectively. They mainly increased their allocation of treasury bonds in interest - rate bonds and increased their allocation of medium - term notes in credit bonds [4][53]. - **Credit Unions**: The custody scale of major bonds was 1.89 trillion yuan, a month - on - month decrease of 14.8 billion yuan. They increased their holdings of interest - rate bonds by 21.6 billion yuan and reduced their holdings of credit bonds and inter - bank certificates of deposit by 0.63 billion yuan and 35.8 billion yuan respectively. They increased their allocation of treasury bonds, policy - bank bonds, and local government bonds in interest - rate bonds [5][54].