Core Viewpoint - The latest C50 Wind Index indicates that liquidity pressure in November is expected to increase compared to October, with a liquidity gap around 2 trillion yuan, as many market institutions anticipate seasonal pressures due to the maturity of financial instruments [1][2][3]. Liquidity Conditions - In October, the central bank maintained a relatively proactive liquidity injection strategy, with a net injection of 4,000 billion yuan, the largest monthly value since March 2025 [2]. - The central bank's operations included a 1.1 trillion yuan front-loaded reverse repo to ease the liquidity pressure at the beginning of the month [2]. - The liquidity gap for November is projected to be around 2 trillion yuan, with some institutions suggesting it could exceed 3 trillion yuan [3]. Monetary Policy Outlook - The central bank has restarted open market operations for government bonds, which many institutions believe could replace the need for a reserve requirement ratio (RRR) cut [1][7]. - The necessity for an RRR cut in the fourth quarter is perceived to be lower, with 17 out of 20 institutions indicating a reduced likelihood of such a move [7][8]. - Analysts suggest that the resumption of government bond trading may serve as a substitute for RRR cuts, allowing for continued liquidity support without aggressive monetary easing [8][9]. Market Reactions - The bond market is expected to experience renewed downward trends, with the 10-year government bond yield potentially approaching the low of 1.7% seen in August [9]. - The overall sentiment in the market indicates that while the central bank's easing measures may be less aggressive, the need for monetary policy support remains due to ongoing economic challenges [9].

Core Viewpoint - The 20th Central Committee's Fourth Plenary Session approved the "Suggestions on Formulating the 15th Five-Year Plan for National Economic and Social Development," emphasizing a stable and continuous monetary policy framework that will guide financial market operations during the 15th Five-Year Plan period [1] Monetary Policy Framework - The "scientific and stable" monetary policy aims to balance short-term and long-term goals, economic growth and risk prevention, as well as internal and external factors [1] - The central bank's liquidity toolbox is well-stocked, with a reasonable distribution of terms, allowing for both short-term and long-term liquidity adjustments [2] Liquidity Tools and Mechanisms - The central bank has shifted its focus from quantity targets to interest rate levels, indicating a reduced emphasis on the monetary supply's direct control [2] - Different liquidity tools serve distinct purposes, with reserve requirement ratio (RRR) adjustments being used more cautiously compared to other tools [3] Interest Rate Mechanism - The central bank will adjust the timing of MLF operations to follow LPR announcements, reinforcing the significance of the 7-day reverse repurchase rate as a policy interest rate [3] - The transmission mechanism of monetary policy is structured as "economic growth - policy interest rate - market interest rate," with the 7-day reverse repurchase rate becoming a key determinant for 10-year government bond yields [5] Economic Indicators and Policy Signals - Historical data shows that each round of RRR cuts corresponds with a decline in government bond yields, indicating that RRR adjustments signal policy easing [4] - The frequency of interest rate cuts is lower than that of RRR cuts, suggesting a more cautious approach by the central bank regarding interest rate adjustments [6]

Core Points - The People's Bank of China (PBOC) conducted a 700 billion yuan reverse repurchase operation with a term of 3 months, indicating a strategy to maintain market liquidity and support government bond issuance [1] - The operation is a continuation of the 700 billion yuan 3-month reverse repos maturing in November, with an expectation of a second operation later in the month due to an additional 300 billion yuan of 6-month reverse repos maturing [1] - The PBOC has resumed open market operations for government bonds, injecting liquidity into the market, which is seen as a dual signal for stabilizing growth and expectations [1] Industry Insights - The recent slowdown in credit issuance has led to a relatively ample liquidity situation in the banking system, reducing the need for increased liquidity injections [1] - There is a possibility of a reserve requirement ratio (RRR) cut by the PBOC before the end of the year to further lower bank funding costs and stabilize the interest margin while reducing overall financing costs in the economy [2]

Group 1 - The People's Bank of China (PBOC) injected 700 billion yuan of liquidity through a reverse repurchase operation to maintain ample liquidity in the banking system [1] - The operation is a continuation of the 700 billion yuan reverse repurchase that will mature on November 7, indicating a stable liquidity environment [1] - Analysts expect the PBOC to conduct another 6-month reverse repurchase operation this month, with a possibility of increasing the amount [1] Group 2 - In October, the PBOC net injected 20 billion yuan of liquidity through open market operations, reflecting a cautious approach to managing market liquidity [2] - The PBOC's resumption of government bond trading is aimed at stabilizing market expectations without causing a rapid decline in interest rates [2] - Future expectations include potential increases in the scale of net bond purchases to counteract the pressure from maturing monetary tools [2]

Report Summary Core View - The central bank will use repurchase agreements and MLF to inject medium - term liquidity into the market, and the scale of medium - term liquidity increase may decline due to the expected RRR cut in the fourth quarter. The resumption of treasury bond trading in October releases a signal of stabilizing growth and does not affect the RRR cut expectation [3][4] Key Points 1. Open Market Operations - On November 5, 2025, the central bank will conduct 700 billion yuan of 3 - month (91 - day) outright repurchase operations, equivalent to a 300 - billion - yuan roll - over of 3 - month outright repurchase in November. It is expected to conduct a 6 - month outright repurchase operation with a likely increase in volume, resulting in a continuous 6 - month injection of medium - term liquidity [1] - There will be 900 billion yuan of MLF maturing in November, and the central bank may conduct an equivalent or slightly increased roll - over [3] 2. Reasons for Liquidity Injection - The issuance of 500 billion yuan of local government bonds by the end of the year, the growth of supporting loans after the 500 - billion - yuan policy - based financial instruments are put into use, and the increase in the maturity volume of inter - bank certificates of deposit in November will lead to a tightening of the capital market. The central bank injects medium - term liquidity to maintain a stable and abundant capital supply [2] 3. Treasury Bond Trading - In October, the central bank resumed treasury bond trading, injecting 20 billion yuan of long - term liquidity into the banking system. The resumption is due to the rise of the 10 - year treasury bond yield to around 1.8% and the widening of the term spread, and it also helps to stabilize the macro - economy [4] 4. Policy Outlook - A new round of growth - stabilizing policies may be introduced in the fourth quarter, with fiscal stimulus, monetary easing, and efforts to stabilize the real estate market. The central bank will use various price - based and quantity - based policy tools to boost growth, and there is ample room for monetary policy due to low inflation [3][4]

Group 1 - The People's Bank of China (PBOC) will conduct a 700 billion yuan reverse repo operation on November 5, maintaining market liquidity [2] - The operation is a continuation of a previous 700 billion yuan reverse repo maturing this month, aimed at keeping liquidity ample in the banking system [2] - In addition to the reverse repo, there are 300 billion yuan of 6-month reverse repos and 900 billion yuan of Medium-term Lending Facility (MLF) maturing this month, indicating further liquidity support is expected [2] Group 2 - Analysts suggest that the lack of an increase in the reverse repo operation is due to relatively ample liquidity in the banking system and a slowdown in credit growth [2] - The resumption of government bond trading in October, with a net injection of 20 billion yuan, is seen as a measure to support long-term liquidity in the banking system [3] - The current low inflation levels provide the PBOC with sufficient room to maneuver its monetary policy, with expectations of potential reserve requirement ratio (RRR) cuts before year-end [3][4]

Core Viewpoint - The People's Bank of China (PBOC) is set to conduct a 700 billion yuan reverse repurchase operation on November 5, aimed at maintaining ample liquidity in the banking system, with a focus on medium-term liquidity support [1][2]. Group 1: Reverse Repo Operations - On November 5, the PBOC will conduct a 700 billion yuan buyout reverse repo operation with a term of 3 months (91 days) [1]. - In November, there will be 700 billion yuan of 3-month reverse repos maturing, indicating a continuation of the same amount of operations [1]. - An additional 300 billion yuan of 6-month reverse repos is expected to mature in November, with a high likelihood of another 6-month reverse repo operation being conducted [1][2]. Group 2: Liquidity Management - The PBOC's actions are in response to potential liquidity tightening due to various factors, including the issuance of 500 billion yuan in local government bonds and the expiration of 500 billion yuan in new policy financial instruments [2]. - The central bank aims to stabilize the funding environment and support government bond issuance while encouraging financial institutions to increase credit supply [2][3]. - The PBOC may also consider rolling over or slightly increasing the 900 billion yuan Medium-term Lending Facility (MLF) due in November [2]. Group 3: Bond Market and Economic Stability - The PBOC resumed net purchases of government bonds in October, indicating improved conditions in the bond market, with the 10-year government bond yield around 1.8% [3]. - The resumption of government bond trading is expected to enhance long-term liquidity support for the banking system and signal a commitment to stabilizing economic growth [3]. - The central bank has sufficient operational space to implement various monetary policy tools to support economic stability in the upcoming quarters [3].

Group 1: Macroeconomic Outlook - The report highlights that both the US and China are entering critical years, with global investment driven by three and a half engines: AI investment, defense spending, and industrial restructuring [1][14] - The nominal GDP growth rate is expected to recover, with a focus on domestic demand and technology as key policy areas [1][2] - The transition from old to new economic drivers in China is anticipated to gain momentum, leading to a rebalancing of supply and demand [2][11] Group 2: Policy Environment - The "15th Five-Year Plan" sets a supportive policy tone, with monetary policy expected to remain accommodative, albeit with less room than in the current year [3][15] - Fiscal policy is projected to maintain a certain level of expansion, with total tools estimated at 15.7 trillion yuan, an increase of approximately 1.2 trillion yuan from this year [3][15] - The report emphasizes the importance of structural tools and the coordination between monetary and fiscal policies to support various sectors [3][15] Group 3: Supply and Demand Dynamics - The narrative of "asset scarcity" in the bond market is expected to weaken, with a focus on the verification of corporate profits and capacity utilization [4][18] - The report notes that government bond supply is likely to increase, but market pressure will be manageable due to central bank support [4][18] - Institutional behavior is identified as a major source of market volatility, with a reduction in stable funding leading to increased market fluctuations [4][18] Group 4: Bond Market Strategy - The bond market is expected to maintain a "low interest rate + high volatility" characteristic, with the central rate likely remaining stable or slightly increasing [5][18] - The report suggests a strategy of segment trading, coupon strategies, and equity exposure as priorities over duration adjustment and credit downgrading [5][18] - The ten-year government bond yield is projected to fluctuate between 1.6% and 2.1%, with a widening of term spreads anticipated [5][18]

Group 1: Economic Growth and Trade - China's economic growth target for 2025 is set at around 5% [2] - GDP growth rates for the first three quarters were 5.4%, 5.2%, and 4.8%, with an average of 5.2% [2] - Domestic fixed asset investment decreased by 0.5% year-on-year from January to September [2] - Retail sales of consumer goods increased by 4.5% year-on-year during the same period, indicating steady domestic demand [2] - Exports rose by 6.1% year-on-year from January to September, aided by the easing of US-China trade tensions [2][3] Group 2: US-China Trade Relations - A meeting between the US and Chinese leaders on October 30 resulted in the cancellation of a 10% tariff on Chinese goods and a one-year suspension of a 24% tariff [3] - The easing of trade tensions has alleviated market concerns and increased risk appetite, contributing to a rise in the Shanghai Composite Index above 4000 points [3] Group 3: Monetary Policy and Market Expectations - The necessity for a reserve requirement ratio (RRR) cut has decreased, with the current RRR at 9% [4] - The likelihood of further RRR cuts this year is low due to the current economic conditions and the easing of trade tensions [4] - The central bank has resumed trading in government bonds, which serves as an alternative to RRR cuts for liquidity management [4] - Increased operations in reverse repos and medium-term lending facilities (MLF) indicate a compensatory measure for the market [4] - Overall, the expectation of monetary easing is diminishing, leading to a potential decline in government bond futures prices in the fourth quarter [4]

Manufacturing Sector - The manufacturing PMI fell to 49.0% in October, down 0.8 percentage points from September and matching the level seen in April 2025, during peak US-China trade tensions[1] - Production and new orders were the largest contributors to the decline, dragging down the PMI by 0.55 and 0.27 percentage points, respectively[1] - The manufacturing prices decreased, with raw material purchase prices and factory prices both dropping by 0.7 percentage points to 52.5% and 47.5%, respectively[2] Service Sector - The service sector's business activity index slightly rebounded to 50.2%, up 0.1 percentage points, but new orders fell by 0.7 percentage points to 46.0%[3] - The gap between the business activity index and new orders widened to 4.2, the highest since October 2024, indicating persistent demand weakness[3] Construction Sector - The construction sector saw new orders rebound by 3.7 percentage points to 45.9%, marking the second consecutive month of increase, although the business activity index fell slightly to 49.1%[4] - The rebound in construction PMI was primarily driven by civil engineering projects related to infrastructure, with business activity index rising over 5 percentage points to above 55%[4] Economic Outlook - The overall composite PMI for October was 50.0%, down 0.6 percentage points from September, the lowest since early 2023[5] - The need for monetary policy support is increasing as the economy shows signs of continued slowdown, with GDP growth at 4.8% in Q3[5] Policy Measures - In October, significant policy measures were implemented, including the rapid deployment of 500 billion yuan in policy development financial tools and the resumption of government bond trading[6] - The likelihood of further monetary easing, including potential rate cuts, is rising, with expectations for a possible reduction in reserve requirements and structural interest rate cuts[6] Market Implications - The liquidity-driven bull market characteristics remain evident, with a lack of momentum for a shift towards cyclical and consumer sectors, suggesting continued focus on technology and dividend stocks[7] - Structural risks persist, with high transaction concentration and elevated stock prices, indicating an increased probability of market volatility[7]