Report Industry Investment Rating No relevant content provided. Report's Core View - The Fed's rate cuts can be divided into preventive and relief (recessionary) rate cuts, with different policy triggering backgrounds and implementation goals [1][5]. - The Fed's preventive rate cut in September 2025 may have limited impact on China's bond market, as China's monetary policy emphasizes "independence" and focuses more on internal balance [1][88][89]. - In the fourth quarter, the economic downward pressure may increase, and the possibility of using policy tools such as RRR cuts and interest rate cuts in the future rises. Currently, the bond market has prominent allocation value, and bond yields may decline oscillating [2][90]. Summary by Relevant Catalogs 1. Types of Fed Rate Cuts - Preventive rate cuts are usually initiated when the economy shows signs of slowing but has not yet entered a recession, aiming to balance employment and inflation risks through small - scale and gradual interest rate adjustments, such as in 1995, 1998, 2019, 2024, and 2025 [1][5][79]. - Relief rate cuts often occur when the economy has fallen into a deep recession or faces a systemic crisis, characterized by large - scale and rapid interest rate cuts to stabilize the financial market, such as in 2001 - 2003, 2007 - 2008, and 2020 [1][5]. 2. Four Fed Rate - Cut Cycles Since 2000 2.1. 2001 - 2003 Relief Rate Cut - **Background and measures**: Triggered by the burst of the Internet bubble, the 9/11 terrorist attack, and corporate financial scandals. The Fed cut rates by 550 basis points from 6.5% to 1.0% [10]. - **US economic indicators**: GDP growth was sluggish, unemployment rate rose, core PCE inflation rate declined, and corporate investment was severely hit [13]. - **Impact on China's bond market**: China's central bank cut rates in 2002. The 1 - year and 10 - year Treasury yields showed different trends, reflecting the reduced sensitivity of the bond market to monetary easing when the domestic economy rebounded [19]. 2.2. 2007 - 2008 Relief Rate Cut - **Time, amplitude, and measures**: From September 2007 to December 2008, the Fed cut rates by 500 basis points to 0% - 0.25% and launched three rounds of QE [25][28]. - **Characteristics**: Fast - paced, large - amplitude, innovative policy tools, and multiple goals [29]. - **Impact on China's bond market**: The Sino - US yield spread narrowed and then fluctuated. There were changes in capital flows, with short - term international capital flowing in and out at different times [30][33][36]. 2.3. 2019 - 2020 Preventive + Relief Rate Cut - **Preventive rate cut (2019.7 - 2019.10)**: Against the background of global economic slowdown and Sino - US trade frictions, the Fed cut rates three times by 25 basis points each time. The US economy showed some recovery, and the bond market fluctuated. In China, the bond market was stable, and foreign capital increased holdings of RMB bonds [40][41][51]. - **Relief rate cut (2020.3)**: Due to the global public health event, the Fed cut rates to 0% - 0.25% and implemented unlimited QE. China also increased the easing intensity, and the bond yield declined and then rebounded [46][47][58]. 2.4. 2024 H2 Preventive Rate Cut - **Background, time, amplitude, and impact**: The Fed cut rates by 100 basis points in the second half of 2024, with a "fast - then - stable" feature. It aimed to avoid a hard landing of the economy. China's bond yields declined, and foreign capital increased holdings of Chinese bonds [60][66][67]. 3. Characteristics of the Preventive Rate Cut in 2025 - **Trigger paths**: Driven by the pressure of national debt scale and debt cost, and the marginal deterioration of the employment market [71][76]. - **Market pricing and yield trends**: The market had partially priced in the rate cut before it happened. After the rate cut in September 2025, the US Treasury yields first declined and then rose [79][80][82]. 4. Impact of the Fed's Rate - Cut Cycle on China's Bond Market - **Short - term impact**: The Fed's rate - cut expectation may attract foreign capital to flow into China's bond market through spread repair and open up space for domestic monetary policy [1][84]. - **Long - term impact**: China's bond market trend may depend more on domestic factors, including economic fundamentals and policy coordination. The influence of the Fed's policy on China's monetary policy may be weakening [87][88]. 5. Economic Situation and Bond Market Outlook in the Fourth Quarter - **Economic situation**: The economic growth in Q3 slowed down compared with Q1 and Q2. Consumption and exports may face pressure, and the external environment is also unstable, increasing the possibility of using policy tools [2][90]. - **Bond market outlook**: The bond market has prominent allocation value, and bond yields may decline oscillating. The 10 - year Treasury yield is expected to fluctuate between 1.60% - 1.80% [2][90].

Core Viewpoint - The Federal Reserve's monetary policy direction is a focal point for global financial markets, with a strong expectation for interest rate cuts in the near future, particularly a 25 basis point cut in October and a cumulative 50 basis point cut by December [1][5]. Group 1: Federal Reserve Officials' Perspectives - Federal Reserve Governor Milan advocates for a 50 basis point cut but expects a 25 basis point reduction, indicating a divergence in views among officials regarding the pace of rate cuts rather than the ultimate goal [2]. - Governor Waller suggests a cautious approach, proposing a 25 basis point cut first to observe market reactions before determining the next steps [3][2]. - Waller also notes that the current inflation rate is estimated at 2.5%, with no significant factors expected to cause a sharp increase, while the job market remains weak [3]. Group 2: Market Volatility and Rate Cut Expectations - The U.S. stock market has experienced volatility, with the VIX index reaching its highest level since April, driven by trade tensions and uncertainties surrounding government shutdowns [4]. - The upcoming Federal Open Market Committee (FOMC) meeting on October 28-29 is anticipated to result in a 25 basis point rate cut, with the target federal funds rate potentially falling to a range of 4% to 4.25% [5]. - The market's strong expectation for rate cuts is influenced by a combination of economic data, differing opinions among Federal Reserve officials, and pressures from market volatility [6].

Group 1 - The Federal Reserve announced a 25 basis point interest rate cut, lowering the target range for the federal funds rate to 4.00-4.25% [1] - Following the rate cut, gold prices experienced significant volatility, with London spot gold reaching a historical high of $3,700 per ounce before dropping to around $3,654 per ounce [4] - The market behavior reflects a "buy the expectation, sell the fact" logic, as gold prices were driven up prior to the rate cut, leading to profit-taking afterward [5] Group 2 - The long-term support for gold remains intact, with over half of the Federal Reserve officials expecting two more rate cuts within the year, which may continue to lower the opportunity cost of holding gold [7] - Central bank demand for gold is strong, with the People's Bank of China increasing its reserves to 74.02 million ounces, and Deutsche Bank predicting gold prices could rise to $4,000 per ounce by 2026 [7] - In the stock market, the A-share and Hong Kong stock markets are showing divergence, with growth sectors outperforming, particularly in the tech sector following the Fed's rate cut [7][9] Group 3 - The response of the A-share market is complex, as it may attract northbound capital inflows for tech growth sectors, but is also heavily influenced by domestic economic fundamentals [9] - The recent CPI decline in China indicates that external benefits need to align with internal policies for effective market support [9] - Following the Fed's rate cut, domestic banks are adjusting their deposit rates, with HSBC lowering its one-year rate for USD deposits to 3.5% [10] Group 4 - Investment strategies need to be adjusted in light of the Fed's rate cut, with recommendations for a "laddered deposit" strategy to balance high interest rates and liquidity [13] - The impact of the Fed's rate cut extends beyond three asset classes, potentially lowering monthly payments for those with floating-rate mortgages and benefiting the import sector due to RMB appreciation [15] - The global easing cycle may lead to increased commodity prices, affecting domestic living costs for items like gasoline and plastic products [15]

Group 1: Federal Reserve Rate Cuts Overview - The Federal Reserve has conducted 5 easing cycles and 5 preventive rate cuts since 1980, with rate reductions ranging from approximately 75 basis points (bp) to 1150 bp[13] - Preventive rate cuts occur when economic growth slows but has not yet entered a recession, while easing cuts are implemented during severe economic downturns[17] - The current easing cycle shares similarities with those in 1995 and 2019, with marginal economic weakening but resilient consumption and services[5] Group 2: Asset Performance During Rate Cuts - U.S. Treasury yields typically decline significantly before the first rate cut, with average declines of 73 bp and 85 bp for easing and preventive cuts, respectively[53] - U.S. equities generally rise during preventive cuts (with an 80% success rate for the Nasdaq and S&P 500) but tend to decline during easing cuts, averaging a drop of 11%-13%[52] - The U.S. dollar usually weakens during both types of rate cuts but tends to rebound after the cycle ends, with an average increase of 2.7% six months post-cut[52] - Gold performs better during preventive cuts, with an 80% success rate, while industrial metals depend more on global demand fundamentals[52]

Core Viewpoint - The significant rise in domestic gold and silver futures prices following the National Day and Mid-Autumn Festival holidays is attributed to the surge in international gold and silver prices during the holiday period, driven by increased market risk appetite due to the U.S. government shutdown [1][2]. Group 1: Gold Market Analysis - COMEX gold futures prices surpassed $4000 per ounce on October 7, primarily due to the ongoing U.S. government shutdown, which has become the fourth longest in history [1]. - The prolonged shutdown may impact the payment of salaries for military and federal employees, and the delay in the release of key economic data, such as non-farm payrolls and CPI, could affect data quality [1]. - Analysts suggest that the recent surge in gold prices may have already priced in much of the market's risk appetite, and any resolution to the government shutdown could lead to price volatility [3]. Group 2: Silver Market Analysis - The rise in silver prices is influenced by multiple factors, including increased demand for safe-haven assets, expectations of preemptive interest rate cuts, and the entry of arbitrage funds [2]. - The recent turmoil in the French government and uncertainties surrounding the independence of the Federal Reserve have heightened market risk aversion, further supporting silver prices [2]. - The People's Bank of China reported an increase in gold reserves, indicating a continued trend of accumulation, which may enhance the purchasing power of gold buyers [2]. Group 3: Short-term and Long-term Outlook - Short-term caution is advised for gold bulls, as indicators suggest overbought conditions, and a rebound in the U.S. dollar could lead to a decline in gold prices [3]. - Long-term trends for gold prices remain positive, with expectations of a 25 basis point rate cut by the Federal Reserve at the end of October, which could provide upward momentum for gold [3]. - For silver, the medium to long-term price center is expected to continue rising, particularly as the end of the rate-cutting cycle may lead to historically low real interest rates, significantly benefiting silver prices [3].

Group 1 - The core viewpoint of the articles highlights a significant increase in gold and silver prices following the National Day and Mid-Autumn Festival holidays, driven by international market trends and domestic factors [1][2] - COMEX gold futures prices surpassed $4000 per ounce on October 7, attributed to rising market risk appetite due to the ongoing U.S. government shutdown, which is now the fourth longest in history [1] - Analysts note that the U.S. government shutdown could impact the release of key economic data, including non-farm payrolls and CPI, potentially affecting market sentiment and economic forecasts [1][2] Group 2 - Silver prices are influenced by multiple factors, including increased demand for safe-haven assets, expectations of preventive interest rate cuts, and the entry of arbitrage funds into the market [2] - The People's Bank of China reported an increase in gold reserves to approximately 7406 million ounces (about 2303.523 tons) as of September, marking the 11th consecutive month of gold accumulation [2] - Tether, the largest stablecoin issuer, plans to accumulate its own gold-backed tokens, indicating a deeper integration of cryptocurrency into traditional safe-haven assets, which may enhance the purchasing power of gold buyers [2] Group 3 - Short-term caution is advised for gold bullish operations, as indicators show signs of overextension, with high open interest but low trading volume, suggesting weakened buying momentum [3] - Despite recent improvements in U.S. economic data and a potential rebound in the dollar, the long-term upward trend for gold prices remains intact, although fluctuations may occur once the government shutdown ends [3] - For silver, medium to long-term price levels are expected to rise, benefiting from the anticipated interest rate cuts, with historical trends indicating significant support for silver prices as the rate-cutting cycle approaches its end [3]

Group 1: Precious Metals Market - Silver prices surged, breaking the $50 per ounce mark for the first time, with a year-to-date increase of 73% [1] - Gold prices fell over 2%, dropping below $3960 per ounce, a decline of nearly $100 from recent highs [1] - As of the latest update, gold was priced at $3976.38 per ounce and silver at $49.04 per ounce [1] Group 2: Oil Market - WTI crude oil futures fell by 1.66%, closing at $61.51 per barrel, while Brent crude oil futures dropped by 1.55% to $65.22 per barrel [6] - A ceasefire agreement between Israel and Hamas was approved, which may impact oil market dynamics due to geopolitical stability [6] Group 3: U.S. Economic Policy - Federal Reserve Chairman Powell emphasized the importance of community banks but did not comment on current economic conditions or monetary policy [7] - New York Fed President John Williams expressed support for further interest rate cuts within the year to mitigate risks of a labor market slowdown [7] Group 4: Market Sentiment and Risks - Analysts noted that the recent surge in gold and silver prices was influenced by the U.S. government shutdown, which has become one of the longest in history [8] - The political turmoil in France and the election of a new Japanese leader have also contributed to increased market risk aversion [8] - The expectation of further interest rate cuts by the Federal Reserve is seen as a positive factor for silver prices, with analysts predicting a potential upward shift in the price center for silver [9][10]

Core Insights - The report analyzes the impact of the U.S. government shutdown on asset prices and provides a forecast for Q4 2025, indicating that the shutdown is expected to lead to a decline in economic growth and increased market volatility due to delayed key economic data [3][14] - The probability of the government reopening after October 15, 2025, is estimated at 75% according to Polymarket [11][12] Economic Impact - The government shutdown is projected to reduce economic growth by 0.2 percentage points per week, equating to a loss of approximately $15 billion weekly, and could result in an additional 43,000 unemployed individuals per month [14][11] - Delayed publication of critical economic data, such as the September non-farm payrolls, will create uncertainty for the Federal Reserve's next interest rate decision and affect corporate investment decisions [14][3] Asset Price Analysis - Short-term expectations for interest rate cuts are reinforced by the government shutdown, while mid-term concerns about U.S. government credit are heightened [4][16] - Gold prices surged to over $4,000 per ounce following the shutdown, while the U.S. dollar showed slight recovery, and U.S. equities and 10-year Treasury yields remained volatile [4][16] Historical Performance Review - Historical data from 1976 shows that during previous government shutdowns, the S&P 500 had an average change of 0.02% with a 55% probability of increase, while the U.S. dollar index typically declined [5][19] - The average increase in gold prices during shutdowns was 0.4%, with a 50% probability of increase, indicating a stronger performance compared to other assets [19][21] Post-Shutdown Asset Price Trends - Following the end of government shutdowns, there is a higher probability of increases in gold prices and U.S. equities, with the S&P 500 showing an average increase of 1.2% in the two weeks post-shutdown [6][24] - Over a month, the S&P 500 and gold prices are expected to continue rising, with the dollar index also showing a tendency to increase [6][24] Q4 2025 Asset Price Forecast - The report anticipates a bullish outlook for U.S. equities and the dollar in Q4 2025, with a steepening yield curve for U.S. Treasuries and a long-term upward trend for gold prices [7][32] - The combination of fiscal expansion and a potential reduction in short-term interest rates is expected to support equity markets, particularly in the context of AI industry growth [7][32] Interest Rate and Inflation Expectations - The 10-year U.S. Treasury yield is projected to fluctuate between 4% and 4.5%, with expectations of a further steepening of the yield curve due to ongoing fiscal pressures [34][36] - The Federal Reserve is anticipated to have room for two rate cuts totaling 50 basis points in 2025, with inflation expectations remaining subdued [36][37] Currency Dynamics - The report suggests that the U.S. dollar may experience short-term strength due to preemptive rate cuts and the economic policies of Japan's new Prime Minister [41][42] - If the government shutdown eases, gold prices may see a short-term correction, but the long-term trend remains upward due to persistent debt risks in the U.S. and Europe [43][44]

Core Insights - The discussion around the Federal Reserve's potential interest rate cuts has intensified, with many investors focusing on the implications for the US dollar's exchange rate. However, the relationship between interest rate cuts and currency depreciation is more complex than it appears [1][3]. Group 1: Nature of Interest Rate Cuts - The simplistic view that "lower rates lead to a weaker dollar" must be abandoned. The impact of Fed rate cuts on the dollar depends on whether the cuts are "preventive" or "recessionary" in nature [3]. - Preventive rate cuts are proactive measures taken to extend economic expansion and manage risks, often leading to increased market confidence and potentially strengthening the dollar [3][4]. - Recessionary rate cuts occur in response to clear signs of economic distress, which can heighten market fears and lead to a flight to safety, often resulting in increased demand for US dollar assets despite the theoretical negative impact on the dollar [4]. Group 2: Global Economic Interconnections - The interconnectedness of the global economy means that fluctuations in major economies can have ripple effects. For instance, the 2008 financial crisis highlighted how US economic issues can impact global markets [6]. - China's economic transitions and policy adjustments also have significant global implications, affecting demand for commodities and influencing international markets [6][8]. - The US dollar's status as the world's reserve currency amplifies the effects of its monetary policy on global financial markets, making it crucial for investors to understand these dynamics [8]. Group 3: Future Market Considerations - Investors should focus on the underlying health of the US economy, analyzing key indicators such as employment, inflation, and consumption to determine the nature of any rate cuts [9]. - Acknowledging the "new normal" for the Chinese yuan, characterized by stability and two-way fluctuations, is essential for understanding its future trajectory in the context of global economic changes [10]. - The interdependence of global economies necessitates a comprehensive perspective and dynamic analytical framework to navigate the complexities of the financial markets [10].

Group 1 - The Federal Reserve announced a 0.25 percentage point interest rate cut, bringing the federal funds target rate to a range of 4% to 4.25%, marking the beginning of the second phase of rate cuts [1] - This rate cut is characterized as a preemptive measure aimed at mitigating potential economic and financial risks amid signs of localized economic slowdown, rather than a crisis response [1] - The Fed is expected to continue with moderate rate cuts in the remaining quarter of the year, potentially implementing 1-2 additional cuts depending on economic growth and inflation trends [1] Group 2 - There has been a significant outflow of funds from the U.S. stock market, with approximately $259 billion net outflow from U.S. long-term equity mutual funds in the first half of the year, and a record outflow of $357.4 billion in July alone [1][2] - The majority of the outflow has shifted towards U.S. bond and money markets, indicating a preference for safer assets rather than a large-scale migration to foreign stock markets [3] - Despite the outflow from U.S. equities, the global allocation remains predominantly in U.S. stocks, with fund managers maintaining around 60% allocation to U.S. equities [2] Group 3 - The inflow of foreign capital into Chinese stocks and funds has reversed a two-year trend of net selling, with a net increase of $10.1 billion in the first half of 2025, indicating a growing interest in the Chinese market [2] - European markets have also benefited from the outflow of funds from the U.S., with countries like Germany, Spain, and Italy experiencing double-digit gains this year [2] - The current trend of capital reallocation reflects a cautious approach by investors, driven by concerns over the U.S. economy, high valuations, and policy uncertainties [3] Group 4 - As the Fed continues its moderate preemptive rate cut strategy, a portion of "smart money" may seek opportunities in global markets, particularly in developed markets like Europe and Japan, while emerging markets may see more structural inflows [4] - The potential for aggressive rate cuts under pressure from the Trump administration could lead to a temporary boost in global markets due to increased liquidity, benefiting both developed and emerging markets [5] - However, the risk of rapid capital outflows remains if the Fed is forced to tighten monetary policy in response to rising inflation, which could negatively impact global markets, especially in emerging economies with high external debt [5]