Market Overview and Analysis - The primary market saw the issuance of government bonds, local government bonds, and policy financial bonds amounting to 468.6 billion, 165.5 billion, and 174.5 billion respectively, with net financing of 338.6 billion, 82.8 billion, and 174.5 billion [1] - Financial bonds (excluding policy financial bonds) totaled an issuance of 132.0 billion with a net financing of 12.5 billion [1] - Non-financial credit bonds had an issuance of 357.9 billion and a net financing of 198.7 billion [1] - One new convertible bond was issued with an expected financing scale of 1.17 billion [1] Secondary Market Review - The bond market showed resilience amidst a strong stock market environment, influenced by factors such as the month-end liquidity, new VAT policies, and central bank's buyout operations [2] Liquidity Tracking - Post month-end, the liquidity naturally eased, and the central bank's announcement of buyout reverse repos further supported new bond issuance, leading to an overnight funding rate dropping below 1.3%, which pushed down funding prices [3] - The R001 and R007 rates decreased by 1.3 basis points and 3.3 basis points respectively compared to the previous week [3] Policy and Fundamentals - July economic data indicated resilient export growth, with core CPI rising for five consecutive months, although the anti-involution policy slightly hindered PPI transmission [4] - High-frequency data showed a slight decline in production and sustained low levels in consumption, with both food and commodity prices decreasing [4] Overseas Market - The easing of the Russia-Ukraine conflict improved market risk sentiment, while deviations in U.S. Treasury auctions put pressure on U.S. bonds, with the 10-year U.S. Treasury closing at 4.27%, up 4 basis points from the previous week [5] Equity Market - The market returned to an upward trend, with the Shanghai Composite Index reaching a new high for the year, while the overall A-share market rose by 1.94% with reduced trading volume, maintaining an average daily trading volume of 1.7 trillion [6] - As of August 7, 2025, the total financing balance for the entire A-share market was 1,998.9 billion, an increase of 27.9 billion from July 31 [6] Bond Market Strategy Outlook - In a low-interest-rate environment, traditional allocations of new funds by residents and institutions towards deposits and bonds are beginning to shift towards assets with rights, forming the basis for the stock market bull run this year [7] - This behavior will not change the downward trend of bond market interest rates but may delay the speed of decline and increase short-term volatility [7] - With the impact of the VAT recovery subsiding, the 10-year bond yield may return below 1.7%, potentially weakening market bullish sentiment [7] - The further downward space for interest rates depends on the central bank's continued support for new bond issuances affected by VAT and the pace of stock market increases [7] - For credit bonds, a relatively loose liquidity environment remains favorable, but attention should be paid to the issue of excessive narrowing of credit spreads [7] - In the convertible bond market, following the rollback of previous anti-involution expectations, there is renewed selection space for convertible bonds, with high-priced bonds not entering conversion periods and those not strongly redeemed gradually moving towards dual highs, maintaining a good overall profit effect [7] - It is important to note that the current risk-reward asymmetry has weakened, and some volatility is inevitable, making participation more challenging for low-volatility strategy investors [7]

Core Viewpoint - The bond market showed slight recovery on August 13, with government bond futures rising across the board, while interbank bond yields fell by approximately 1 basis point. The market is supported by stable fundamentals, although short-term performance is influenced by risk appetite and stock market trends [1][2]. Market Performance - Government bond futures closed higher, with the 30-year main contract up 0.10% at 118.270, the 10-year main contract up 0.02% at 108.435, the 5-year main contract up 0.05% at 105.745, and the 2-year main contract up 0.03% at 102.368 [2]. - The yields on major interbank bonds mostly declined slightly, with the 30-year government bond yield down 1.25 basis points to 1.961%, the 10-year policy bank bond yield down 0.75 basis points to 1.829%, and the 10-year government bond yield down 0.9 basis points to 1.7185% [2]. International Market Trends - In North America, U.S. Treasury yields were mixed, with the 2-year yield down 2.93 basis points to 3.727% and the 10-year yield up 0.97 basis points to 4.291% [3]. - In Asia, Japanese bond yields rose, with the 10-year yield increasing by 1.2 basis points to 1.511% [4]. - In the Eurozone, yields on 10-year bonds increased, with French yields up 5.3 basis points to 3.407% and German yields up 4.7 basis points to 2.742% [4]. Primary Market Activity - Agricultural Development Bank's financial bonds had successful bids with yields of 1.3575% for 1.074 years, 1.7089% for 3 years, and 1.8490% for 10 years, with bid-to-cover ratios of 2.36, 3.48, and 2.57 respectively [5]. Funding Conditions - The central bank conducted a 7-day reverse repurchase operation of 118.5 billion yuan at a rate of 1.40%, resulting in a net withdrawal of 20 billion yuan for the day [6]. - Short-term Shibor rates mostly increased, with the overnight rate unchanged at 1.315% and the 7-day rate rising by 0.1 basis points to 1.434% [6]. Institutional Insights - Institutions noted that while the stock market's strength may pressure bond market sentiment, the domestic economy still faces downward pressure, and no significant turning point in fundamentals has been observed [7]. - The current economic data release window suggests that economic performance is likely to meet expectations, leading to narrow fluctuations in the bond market [7][8].

Core Viewpoint - The article discusses the current state of the financial market, highlighting the impact of U.S.-China tariff negotiations and the introduction of new loan policies on market sentiment and investment strategies [3][6][8]. Group 1: Financial Market Conditions - The U.S.-China tariff truce has been extended for another 90 days, contributing to a continued rise in the stock market [6]. - The central bank conducted a 7-day reverse repurchase operation of 114.6 billion, with a net withdrawal of 46.1 billion due to 160.7 billion reverse repos maturing [3]. - The overall funding environment is described as balanced and slightly loose, with stable funding rates; DR001 is around 1.32% and DR007 is around 1.44% [4]. Group 2: Loan Policies and Market Reactions - New policies for interest subsidies on business loans and consumer loans were announced, leading to fluctuations in interest rates, which peaked at 1.7275% after the announcement [6][7]. - There is a notable concern regarding the use of loan funds, with warnings against using borrowed money for investment purposes [7]. Group 3: Employment and Industry Trends - The number of ride-hailing drivers in China has increased from 2.891 million in 2020 to 7.483 million in 2024, reflecting an annual growth rate of 26.8%, while the average daily orders have significantly dropped from 23.3 to 10 [7]. - The article expresses a sentiment of uncertainty regarding career paths in the current economic climate, indicating that traditional job security is diminishing [8].

Report Summary Industry Investment Rating No information provided. Core Viewpoints On August 8, the capital market showed a stable and slightly loose trend. The bond market oscillated strongly, the convertible bond market continued to rise slightly, and most convertible bond issues increased. Yields on U.S. Treasury bonds of various maturities generally rose, and yields on 10-year government bonds of major European economies also generally increased [1]. Section Summaries 1. Bond Market News - **Domestic News** - In July, the CPI increased by 0.4% month-on-month, turning from a decline to an increase, and remained flat year-on-year. The core CPI rose by 0.8% year-on-year, with the growth rate expanding for three consecutive months. The PPI decreased by 0.2% month-on-month, with the decline narrowing by 0.2 percentage points compared to June, and decreased by 3.6% year-on-year, with the decline remaining the same as in June [3]. - In July, the China Small and Medium - Sized Enterprises Development Index was 89.0, remaining the same as the previous month. Among the sub - indices, the capital index and investment index increased by 0.2 and 0.1 points respectively [4]. - Trust companies are prohibited from conducting trust business that essentially provides financing for a single financing party, which will have a significant impact on non - standard businesses [4]. - Two standard baskets of science and technology innovation bonds were launched for trading, helping to improve the liquidity of science and technology innovation bonds in the inter - bank market [5]. - **International News** - The Trump administration has unexpectedly expanded the list of candidates for the next Federal Reserve Chairman to about 10 people, which may ease market concerns about the politicization of the Federal Reserve [6]. - **Commodities** - On August 8, WTI September crude oil futures closed flat at $63.88 per barrel, down about 5.1% for the week. Brent September crude oil futures rose 0.24% to $66.59 per barrel, down about 4.4% for the week. COMEX December gold futures rose about 1.1%, and NYMEX natural gas prices fell 2.79% to $2.996 per ounce [7]. 2. Capital Market - **Open Market Operations** - On August 8, the central bank conducted 122 billion yuan of 7 - day reverse repurchase operations at a fixed interest rate, with an operating rate of 1.40%. There were 126 billion yuan of reverse repurchases maturing on the same day, resulting in a net withdrawal of 4 billion yuan [9]. - **Capital Interest Rates** - On August 8, the capital market remained stable and slightly loose. DR001 decreased by 0.35bp to 1.312%, and DR007 decreased by 2.64bp to 1.425% [10]. 3. Bond Market Dynamics - **Interest - Bearing Bonds** - **Spot Bond Yield Trends** - On August 8, the bond market oscillated strongly. As of 20:00 Beijing time, the yield of the 10 - year Treasury bond active bond 250011 rose 0.35bp to 1.6910%, and the yield of the 10 - year China Development Bank bond active bond 250210 remained flat at 1.7900% [12]. - **Bond Tendering** - The 25 - attached Treasury Bond 07 (Continued 3) with a term of 0.74 years had an issue size of 126 billion yuan, a winning yield of 1.6052%, a full - field multiple of 3.38, and a marginal multiple of 6.22. The 25 - ultra - long Special Treasury Bond 05 (Continued 2) with a 30 - year term had an issue size of 82 billion yuan, a winning yield of 1.9576%, a full - field multiple of 3.6, and a marginal multiple of 1.76 [14]. - **Credit Bonds** - **Secondary Market Transaction Anomalies** - On August 8, the trading price of one urban investment bond, "H8 Longkong 05", deviated by more than 10%, falling by more than 60% [14]. - **Credit Bond Events** - Three bonds of Sunac Real Estate, such as "H Sunac 07", will resume trading on August 11, and a total of 3.3 billion yuan of bonds have been cancelled [15]. - The bond "H22 Futong 1" of Futong Group, originally due on August 8, has been given a 20 - day grace period by bondholders [15]. - Due to a bond trading dispute with Junkang Life Insurance, the equity of 9 companies held by Fanhai Holdings has been frozen [15]. - Panzhihua Iron and Steel Group decided to re - issue the "25 Panzhihua Iron and Steel Group SCP003 (Science and Technology Innovation Bond)" at an appropriate time due to market fluctuations [15]. - **Convertible Bonds** - **Equity and Convertible Bond Indices** - On August 8, the three major A - share indices closed down. The Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index fell 0.12%, 0.26%, and 0.38% respectively, with a full - day trading volume of 1.74 trillion yuan [17]. - The main convertible bond market indices closed up. The China Bond Convertible Bond Index, Shanghai Convertible Bond Index, and Shenzhen Convertible Bond Index rose 0.08%, 0.04%, and 0.15% respectively, with a trading volume of 86.236 billion yuan, a decrease of 8.605 billion yuan from the previous trading day [17]. - **Convertible Bond Tracking** - On August 8, Changhong Convertible Bond, Leizhi Convertible Bond, Huayang Convertible Bond, Kairun Convertible Bond, and Huahai Convertible Bond announced that the board of directors proposed to lower the conversion price [24]. - On August 8, Xince Convertible Bond and Longhua Convertible Bond announced early redemption, and Tianrun Convertible Bond and Gaoce Convertible Bond announced that they were about to trigger the early redemption condition [24]. - **Overseas Bond Markets** - **U.S. Bond Market** - On August 8, yields on U.S. Treasury bonds of various maturities generally rose. The yields of 2 - year and 10 - year U.S. Treasury bonds rose 4bp to 3.76% and 4.27% respectively [21]. - The yield spread between 2 - year and 10 - year U.S. Treasury bonds remained unchanged at 51bp, and the yield spread between 5 - year and 30 - year U.S. Treasury bonds narrowed by 1bp to 101bp [22]. - The break - even inflation rate of the 10 - year U.S. Treasury Inflation - Protected Securities (TIPS) rose 4bp to 2.39% [23]. - **European Bond Market** - On August 8, yields on 10 - year government bonds of major European economies generally rose. The yield of the 10 - year German government bond rose 4bp to 2.69%, and the yields of 10 - year government bonds of France, Italy, Spain, and the UK rose 5bp, 5bp, 6bp, and 6bp respectively [25]. - **Price Changes of Chinese - Issued U.S. Dollar Bonds** - As of the close on August 8, the prices of some Chinese - issued U.S. dollar bonds changed. For example, the price of INDI 4 ½ 11/15/27 rose 5.3%, and the price of GRNLGR 5.9 02/12/25 fell 4.7 - 5.1% [27].

Report Information - Report Title: "Fixed Income Weekly: Have Large Banks Started Buying Long-Term Bonds? - Weekly Report on Bond Market Institutional Behavior (Week 1 of August)" [1] - Report Date: August 10, 2025 [2] - Chief Analyst: Yan Ziqi [3] - Analyst: Hong Ziyan [3] 1. Report Industry Investment Rating No industry investment rating information is provided in the report. 2. Report Core View - The bond market ran smoothly this week, with the 10-year Treasury yield slightly dropping to 1.69%, the funding rate staying around 1.42%, and the 5-year AAA medium - short note yield dropping to 1.91% [3][11] - Large banks continued to buy short - term bonds, and although they bought some long - term bonds, the volume was less than 10 billion yuan, so it's hard to say they have started buying long - term bonds. However, they have bought long - term local government bonds in multiple weeks since June, which may be related to duration balance and return requirements [3][4][12] - Funds further increased their purchases of credit bonds and Tier 2 capital bonds. With the easing of the funding situation, the bond market leverage ratio climbed, and there is still an opportunity for credit spreads to compress [4][13] 3. Summary by Directory 3.1 This Week's Institutional Behavior Review - **Yield Curve**: Treasury yields declined overall, with the 1Y yield down 2bp, 3Y down 3bp, 5Y down about 3bp, 7Y down 1bp, 10Y down 2bp, 15Y flat, and 30Y up 1bp. For CDB bonds, short - term yields declined and long - term yields increased, with the 1Y yield changing less than 1bp, 3Y down 1bp, 5Y down 1bp, 7Y changing less than 1bp, 10Y up 2bp, 15Y up 2bp, and 30Y up 1bp [14] - **Term Spread**: Treasury interest spreads rose, and the spreads widened overall; CDB bond interest spreads were stable, and the middle - term spreads widened [15][16][17] 3.2 Bond Market Leverage and Funding Situation - **Leverage Ratio**: It dropped to 107.51%. From August 4th to August 8th, it first decreased and then increased during the week. As of August 8th, it was about 107.51%, down 0.07 pct from last Friday and up 0.24 pct from Monday [21] - **Average Daily Turnover of Pledged Repurchase**: The average daily turnover of pledged repurchase this week was 8.1 trillion yuan, with the average daily overnight proportion at 89.87%. The average overnight turnover was 7.3 trillion yuan, up 1.53 trillion yuan month - on - month, and the overnight trading proportion was up 3.10 pct [27][28] - **Funding Situation**: Bank lending showed a fluctuating upward trend. As of August 8th, large and policy banks' net lending was 5.22 trillion yuan; joint - stock and urban/rural commercial banks' average daily net borrowing was 0.57 trillion yuan, and the net borrowing on August 8th was 0.74 trillion yuan. The net lending of the banking system was 4.47 trillion yuan. DR007 fluctuated upward, and R007 fluctuated downward [31] 3.3 Duration of Medium - and Long - Term Bond Funds - **Median Duration**: The median duration of medium - and long - term bond funds decreased to 2.81 years (de - leveraged) and 3.12 years (leveraged). On August 8th, the de - leveraged median duration was 2.81 years, down 0.02 years from last Friday; the leveraged median duration was 3.12 years, down 0.06 years from last Friday [45] - **Duration by Bond Fund Type**: The median duration (leveraged) of interest - rate bond funds decreased to 3.92 years, up 0.04 years from last Friday; the median duration (leveraged) of credit bond funds decreased to 2.89 years, down 0.07 years from last Friday. The de - leveraged median duration of interest - rate bond funds was 3.44 years, down 0.03 years from last Friday; the de - leveraged median duration of credit bond funds was 2.65 years, down 0.04 years from last Friday [48] 3.4 Category Strategy Comparison - **Sino - US Yield Spread**: It generally narrowed, with the 1Y narrowing by 8bp, 2Y by 10bp, 3Y by 6bp, 5Y by 9bp, 7Y by 7bp, 10Y by 6bp, and 30Y by 3bp [54] - **Implied Tax Rate**: It generally widened. As of August 8th, the CDB - Treasury spread widened by 2bp for 1Y, 2bp for 3Y, 1bp for 5Y, about 1bp for 7Y, 3bp for 10Y, about 2bp for 15Y, and less than 1bp for 30Y [55] 3.5 Bond Lending Balance Changes - On August 8th, the lending concentration of the active 10 - year Treasury bond increased, while the lending concentration trends of the second - active 10 - year Treasury bond, active 10 - year CDB bond, second - active 10 - year CDB bond, and active 30 - year Treasury bond declined. All institutions showed a decline [59]

Monetary Market Overview - The central bank's OMO net withdrawal this week was CNY 536.5 billion, with an additional CNY 700 billion in 3M reverse repos on Friday[3] - The average daily transaction volume of pledged repos increased to CNY 8.11 trillion, with a peak of CNY 8.4 trillion on Wednesday[4] - The overnight interest rate (DR001) has seen a downward adjustment, with the lower limit dropping to 1.25% from 1.3%[3][20] Interbank Certificate of Deposit Market - The 1Y Shibor rate decreased by 0.7 basis points to 1.64%, while the 1-year AAA interbank certificate of deposit secondary rate fell by 1.75 basis points to 1.6175%[4] - The net financing scale of interbank certificates of deposit rose to CNY 192 billion, with state-owned banks contributing CNY 74.4 billion[4] Government Bond Issuance - This week, the actual net payment for government bonds was CNY 370.6 billion, with an expected increase to CNY 410.1 billion next week[22] - Cumulative issuance of new general bonds reached CNY 542.6 billion, while new special bonds totaled CNY 28,179 billion[22] Future Expectations - The central bank is expected to maintain a stable monetary policy, with the lower limit of DR001 projected to decrease to 1.2% by September[21] - The government bond issuance forecast for August and September remains unchanged at CNY 2.5 trillion and CNY 2.1 trillion, respectively[31]

1. Report Industry Investment Rating - The rating for treasury bonds is "oscillating" [4] 2. Core Viewpoints of the Report - The bond market is still in a favorable period. The pattern of fundamental factors favoring the bond market remains unchanged, the central bank is expected to continue to support market liquidity, and the bond market should continue to strengthen slightly [2][16] - The performance of credit data in July should be relatively weak, and the tax period is a disturbing factor, but the central bank can keep the capital market in an overall balanced state. After continuous upward movement, the upward momentum of the stock market has weakened, and it is expected to consolidate next week [2] 3. Summary According to the Table of Contents 3.1 One - Week Review and Views 3.1.1 This Week's Trend Review - From August 4th to August 10th, treasury bond futures rose slightly. Market sentiment was affected by various factors such as new bond interest taxation news, rumors about bond issuance changes, stock market trends, and central bank liquidity operations. As of August 8th, the settlement prices of the main contracts of 2 - year, 5 - year, 10 - year, and 30 - year treasury bond futures were 102.370, 105.820, 108.610, and 119.250 yuan respectively, with changes of +0.018, +0.090, +0.160, and +0.160 yuan compared to the previous weekend [1][13] 3.1.2 Next Week's Viewpoint - The fundamental factors favorable to the bond market remain unchanged. The 7 - month financial data to be released next week is expected to be weak. The central bank will continue to support liquidity, and the capital market will be balanced. The difficulty of further increasing market risk appetite next week is relatively high, and the bond market will be less sensitive to the rise of the stock market [16][17] - Strategies include: holding long positions in trading accounts next week, paying close attention to market sentiment changes, holding the strategy of steepening the yield curve, and observing the narrowing of inter - period spreads [18][19] 3.2 Interest - Bearing Bond Weekly Observation 3.2.1 Primary Market - This week, 62 interest - bearing bonds were issued, with a total issuance volume of 8085.09 billion yuan and a net financing amount of 5958.98 billion yuan. The net financing amount of treasury bonds increased, while that of local government bonds decreased, and that of inter - bank certificates of deposit increased [23] 3.2.2 Secondary Market - Treasury bond yields mostly declined. As of August 8th, the yields of 2 - year, 5 - year, 10 - year, and 30 - year treasury bonds were 1.40%, 1.55%, 1.69%, and 1.96% respectively, with changes of - 2.44, - 2.32, - 1.76, and +1.00 bp compared to the previous weekend. The 10Y - 1Y spread narrowed, while the 10Y - 5Y and 30Y - 10Y spreads widened [27] 3.3 Treasury Bond Futures 3.3.1 Price, Trading Volume, and Open Interest - Treasury bond futures rose slightly. As of August 8th, the settlement prices of the main contracts of 2 - year, 5 - year, 10 - year, and 30 - year treasury bond futures were 102.370, 105.820, 108.610, and 119.250 yuan respectively, with changes of +0.018, +0.090, +0.160, and +0.160 yuan compared to the previous weekend. The trading volumes and open interests of different - term treasury bond futures changed to varying degrees [36][39] 3.3.2 Basis and IRR - This week, the opportunity for cash - and - carry arbitrage was not obvious. The capital market was generally loose, and the futures basis generally oscillated within a narrow range. The IRR of the CTD bonds of each variety's main contracts was between 1.4% - 1.8%, and the current certificate of deposit interest rate was between 1.5% - 1.6%, so the opportunity for cash - and - carry arbitrage strategies was relatively limited [43] 3.3.3 Inter - period and Inter - variety Spreads - As of August 8th, the inter - period spreads of the 2509 - 2512 contracts of 2 - year, 5 - year, 10 - year, and 30 - year treasury bond futures were - 0.066, - 0.055, +0.105, and +0.370 yuan respectively, with changes of - 0.024, 0.000, +0.080, and +0.100 yuan compared to the previous weekend. Next week, the inter - period spreads are expected to oscillate within a narrow range and narrow slightly [46][47] 3.4 Capital Market Weekly Observation - This week, the central bank conducted 11267 billion yuan of reverse repurchase operations in the open market, with 16632 billion yuan of reverse repurchases maturing, resulting in a net withdrawal of 5365 billion yuan. Capital interest rates such as R007, DR007, SHIBOR overnight, and SHIBOR 1 - week all declined slightly. The average daily trading volume of inter - bank pledged repurchase increased [51][54][56] 3.5 Overseas Weekly Observation - The US dollar index oscillated weakly, and the yield of 10Y US treasury bonds increased. As of August 8th, the US dollar index fell 0.43% to 98.2670 compared to the previous weekend's close, the yield of 10Y US treasury bonds was reported at 4.27%, up 4BP from the previous weekend, and the spread between Chinese and US 10Y treasury bonds was inverted by 258.0BP [61] 3.6 Inflation High - Frequency Data Weekly Observation - This week, industrial product prices showed mixed trends. The Nanhua Industrial Product Index, Metal Index, and Energy and Chemical Index changed by - 35.19, +75.23, and - 36.18 points respectively compared to the previous weekend. Agricultural product prices also showed mixed trends, with the prices of pork, 28 key vegetables, and 7 key fruits changing by - 0.19, +0.21, and - 0.05 yuan/kg respectively compared to the previous weekend [65] 3.7 Investment Advice - The first and middle ten - days of August are a favorable period for the bond market, and trading accounts can continue to hold long positions next week [18][66]

Core Viewpoint - The market appears chaotic and random on the surface, but it actually follows a significant trend, whether it is rising, falling, or consolidating [1] Group 1: Market Conditions - The restaurant and accommodation sector experienced a profit drop of 67% in the first half of 2025 [8] - The central bank conducted a 122 billion yuan reverse repurchase operation, with 126 billion yuan maturing today, resulting in a net withdrawal of 4 billion yuan [4] - The interbank funding market showed a slight decline in funding rates, with DR001 around 1.31% and DR007 around 1.43% [5] Group 2: Bond Market - The bond market saw a slight increase in long-term bond yields, with the 10-year government bond yield dropping to approximately 1.685% before closing at 1.691% [7][10] - The issuance of local government bonds was stable, with new issuance rates about 5 basis points higher than the secondary market, aligning with market expectations [8] - The market is anticipating the upcoming Producer Price Index (PPI) data, as there are concerns about rising commodity prices [8]

Core Viewpoint - The central bank's recent actions indicate a stable short-term liquidity environment, but potential disturbances may arise due to increased government bond issuance and other factors, leading to a higher probability of a reserve requirement ratio (RRR) cut in the future [1][5][6] Group 1: Liquidity Status - The central bank conducted a 20 billion yuan reverse repurchase operation with a bid rate of 1.80%, reflecting a relatively ample short-term liquidity situation [1] - Since the beginning of May, the central bank's reverse repurchase operations have consistently maintained at a low level of 20 billion yuan, indicating a stable liquidity environment in the banking system [2] - May is traditionally a month with high tax payments, yet the market liquidity has remained stable, with tax payment impacts not being significantly pronounced [2] Group 2: Potential Disturbances - Experts suggest that the market may face increased disturbances due to rising government bond issuance, corporate dividend repatriation, and mid-year assessments, although overall liquidity is expected to remain balanced and slightly loose [3][4] - The net payment for government bonds during the week of May 27-31 reached 546.6 billion yuan, significantly higher than the previous week, marking the highest weekly net payment in 2024 [3] Group 3: Monetary Policy Outlook - Discussions around a potential RRR cut have resurfaced due to the increased issuance of government bonds, with experts suggesting that the central bank may adopt proactive measures to mitigate the impact on liquidity [5][6] - The central bank has indicated that there is still room for an RRR cut, and the combination of various monetary policy tools is likely to support the smooth issuance of government bonds [5] - Some analysts believe that the timing of an RRR cut may coincide with the accelerated issuance of government bonds to facilitate their successful placement [6]

Group 1: Report Industry Investment Rating - No relevant content provided Group 2: Core Views of the Report - In July, the bond market oscillated weakly due to factors such as the central bank's protection of the capital market, short - term settlement of Sino - US economic and trade negotiations, and the "anti - involution" driving the equity and commodity markets. The long - end yield increased more, with the 10Y and 1Y Treasury bond yields rising by 6BP and 4BP respectively [1][8]. - In August, from the fundamental perspective, focus on the possible improvement of CPI and social financing structure, the resilience of exports after the extension of Sino - US tariff exemptions, the marginal changes of PMI in domestic and external demand, and the impact of the "anti - involution" policy on the improvement of the prosperity index. Also, observe the possible disturbances of the improvement of key data such as real estate on the fundamentals and expectations [2]. - In terms of supply, the single - month issuance peak of ultra - long special national bonds and the continued high - level use of new special bonds are expected to drive the high supply of government bonds in August. The net supply of government bonds in August may be around 1.4 trillion yuan, which may be the peak in the second half of the year [2]. - Regarding the capital market, there may be phased fluctuations due to the end of the month and the peak of inter - bank certificate of deposit (CD) maturities. After entering August, with the decline of inter - bank CD scale and the central bank's protection, the capital market is expected to return to a balanced and loose state. The central bank may restart Treasury bond trading, and multiple tools will jointly support the reasonable and abundant liquidity [2]. - From the policy perspective, the Politburo meeting at the end of July was positive but with limited incremental information. The Sino - US tariff negotiation was settled at the end of July, with a 90 - day tariff exemption extension, and the attitude of the US needs to be continuously monitored [3]. - In terms of institutional behavior, institutions still increased their holdings in July. In August, with interest rates likely to decline and fluctuate, focus on the support of large - scale banks for the short - end, the increase in the long - end holdings of rural commercial banks, the recovery of the fund's motivation to increase holdings by extending the duration, and the marginal change in the insurance company's willingness to allocate ultra - long - end bonds [3]. Group 3: Summary According to the Catalog 1. Bond Market Review: Interest Rates Oscillated Upward, and the Yield Curve Steepened Bearishly - In July, affected by multiple factors, the bond market oscillated weakly. The long - end yield increased more, with the 10Y and 1Y Treasury bond yields rising by 6BP and 4BP respectively. The term spread widened by 2BP to 32BP [1][8]. - The yield curve of Treasury bonds steepened bearishly in July, with the medium - and long - end yields generally rising more. The implied tax rate of China Development Bank bonds generally increased [9]. - Overseas, US inflation continued to rise slightly, labor data improved, and the Fed maintained the benchmark interest rate unchanged in July. The market's expectation of a September interest rate cut decreased. The yield of US Treasury bonds rose, and the Sino - US interest rate spread inverted further [10]. 2. This Month's Outlook and Strategy (1) This Month's Bond Market Outlook: The Capital Market is Likely to Return to Normal, and Supply will Reach a Peak in the Second Half of the Year - **Fundamentals**: For the July macro - data to be released, pay attention to the possible improvement of CPI and social financing structure, the resilience of exports after the extension of tariff exemptions, the marginal changes of PMI, and the impact of real estate data improvement on fundamentals and expectations [2][28]. - **Supply**: The single - month issuance peak of ultra - long special national bonds and the continued high - level use of new special bonds will drive the high supply of government bonds in August. The net supply of government bonds in August is expected to be around 1.4 trillion yuan, which may be the peak in the second half of the year [2][41]. - **Capital Market**: There may be phased fluctuations at the end of the month, but after entering August, with the decline of inter - bank CD scale and the central bank's protection, the capital market is expected to return to a balanced and loose state. The central bank may restart Treasury bond trading, and multiple tools will jointly support the reasonable and abundant liquidity [2][48]. - **Policy**: The Politburo meeting at the end of July was positive but with limited incremental information. The Sino - US tariff negotiation was settled at the end of July, with a 90 - day tariff exemption extension, and the attitude of the US needs to be continuously monitored [3][61]. - **Institutional Behavior**: Institutions still increased their holdings in July. In August, with interest rates likely to decline and fluctuate, focus on the support of large - scale banks for the short - end, the increase in the long - end holdings of rural commercial banks, the recovery of the fund's motivation to increase holdings by extending the duration, and the marginal change in the insurance company's willingness to allocate ultra - long - end bonds. The adjustment of government bond VAT may also affect institutional allocation logic [3][68]. (2) Bond Market Strategy: Focus on the Balance between Stocks and Bonds, the Bond Market will Oscillate Downward, and Pay Attention to Trading Opportunities - In August, the main points of concern are the return of the capital market to a loose state under the central bank's protection, the shift from the stock - bond seesaw to the balance between stocks and bonds, the peak supply of government bonds due to the acceleration of special bond issuance, and the short - term impact of the change in government bond VAT [74]. - In terms of interest rates, the bond market's capital market in August is likely to return to a stable state under the central bank's protection. The bond market is still in a favorable environment, but the implementation of broad - based monetary policies needs to be awaited. The subsequent market is likely to evolve from the stock - bond seesaw to a balanced state. Short - term bond interest rates may decline marginally. Strategies include maintaining an appropriate duration, focusing on band trading, paying attention to the trading value of old bonds and the allocation value of new bonds, taking profits when yields are low, and increasing allocations when the 10 - year Treasury bond yield rises above 1.75% [76]. 3. Important Economic Calendar for August - The table provides the expected release dates and market expectations of various economic indicators in July and August, including foreign exchange reserves, CPI, PPI, M2, social financing scale, etc. [78]