Group 1 - Japanese Finance Minister Kato Katsunobu issued a strong verbal warning regarding the yen's exchange rate, stating that the foreign exchange market is experiencing unilateral and rapid fluctuations, and reaffirmed the government's heightened vigilance towards market dynamics [1] - The yen depreciated over 4% against the dollar in October, making it the worst-performing currency among G10 currencies, attributed to expectations of a return to "Abenomics" policies under the new Prime Minister Kishi Nobuo [1] - The Bank of Japan maintained its interest rates, with Governor Ueda Kazuo emphasizing that the central bank is not lagging behind the curve, which has contributed to downward pressure on the yen [1] Group 2 - Despite increased verbal interventions, major Wall Street financial institutions assess that the immediate risk of actual market intervention by Japanese authorities remains low, with the dollar expected to surpass 160 yen by April 2024 [2] - The Japanese government conducted two large-scale foreign exchange market interventions from April to July 2024, utilizing a total of approximately 15.3233 trillion yen (about 982.5 billion USD), marking a historical high for intervention scale [2] - Goldman Sachs noted that the yen does not appear to be at an exceptionally weak level, with recent movements closely tied to the repricing of fiscal risk premiums and changes in market expectations regarding the Bank of Japan's short-term policies [2] Group 3 - Bank of America strategist Yamada Shuukei expressed a similar view, indicating that without excessive volatility or significant speculative positions, even if the dollar surpasses 155 yen, immediate government intervention is unlikely [3] - Goldman Sachs estimates that the Japanese Finance Ministry still has about 270 billion USD available for intervention, capable of replicating recent intervention scales before needing to sell long-term securities [3] - From a long-term perspective, Goldman Sachs expects the yen to gradually strengthen, driven by declining hedging costs and a weakening dollar index due to anticipated Fed rate cuts [3]

Core Insights - The report constructs a "3×3" matrix for analyzing USD liquidity, focusing on the federal funds market, repo market, and offshore USD market, while monitoring liquidity changes across scale, price, and policy dimensions [1][6][8] - Current structural pressures on USD liquidity are attributed to the Federal Reserve's balance sheet reduction and large-scale debt issuance, but the likelihood of a comprehensive liquidity crisis remains low under non-extreme conditions due to robust policy tools [1][3][6] Federal Funds Market - The federal funds market is the cornerstone of USD liquidity, with a focus on scale indicators. The Fed's balance sheet reduction since June 2022 has decreased total assets to 74.1% of the June 2022 level, but reverse repo tools (RRP) have provided a buffer, maintaining reserves at $3.2 trillion as of September 2025, which is 12.9% of total bank assets [1][13] - The effective federal funds rate (EFFR) remains stable within the interest on reserves balance (IORB) of 4.15% and ON RRP of 4.0%, with discount window usage being restrained due to stigma effects [1][17] Repo Market - The repo market is a critical liquidity hub, with the secured overnight financing rate (SOFR) and primary dealer market-making capabilities as core observation points. Since September 2025, SOFR has fluctuated around the upper limit of the rate corridor, with a spread to ON RRP increasing to 16 basis points, indicating marginal tightening [2][20] - The ratio of primary dealer reverse repos to reserves has risen to 0.88, reflecting ongoing pressure, although it remains below crisis levels [2][20] Offshore USD Market - The offshore USD market has shown characteristics of "bondification" and "derivatization," with currency swap basis as a key observation indicator. Since 2025, the cross-currency basis for euro/USD and yen/USD has narrowed, indicating maintained offshore liquidity [2][27] - The use of central bank currency swaps and FIMA repo facilities during crises serves as significant signals of systemic liquidity pressure, with both tools available to address liquidity needs across various market levels [2][35][38] Future Outlook - Future USD liquidity faces multiple contraction pressures, including ongoing balance sheet reduction by the Fed and increased Treasury issuance, which may lead reserves to drop below $3 trillion by September 2025, approaching a critical threshold of $2.7 trillion [3][6] - The Fed has established a multi-layered liquidity management toolset, which includes the discount window, SRF, FIMA repo, and central bank currency swaps, to mitigate systemic risks under non-extreme conditions [3][6]

Core Viewpoint - The Japanese yen is approaching the critical 155 level against the US dollar, raising speculation about potential intervention by Japanese authorities, but major investment banks like Goldman Sachs and Bank of America believe immediate intervention is unlikely as current conditions do not meet the usual criteria for action [1][4]. Group 1: Market Conditions - The yen depreciated approximately 4% against the dollar in October, making it the worst-performing currency among G-10 currencies [1]. - As of Tuesday, the yen fell further to 154.48, driven by market interpretations of Prime Minister Kishida's inclination towards fiscal expansion and dovish monetary policy [1][3]. - Goldman Sachs and Bank of America suggest that the yen's recent weakness is primarily due to the repricing of Japan's fiscal risk premium and adjustments in short-term interest rate expectations [4]. Group 2: Intervention Triggers - Goldman Sachs indicates that intervention likelihood will significantly increase only when the USD/JPY exchange rate reaches the 161-162 range, while Bank of America suggests a meaningful policy response may occur if the rate tests 158 [1][4]. - Historical context shows that the last intervention by the Japanese Ministry of Finance occurred in 2024, with intervention levels around 157.99 to 161.76 [4]. Group 3: Future Predictions - Bank of America maintains a year-end forecast of 155 for the exchange rate but notes an increased risk of the rate overshooting to 160 by Q4 2025 [5]. - Goldman Sachs expects the yen to gradually appreciate as hedging costs decrease and the dollar weakens, with potential acceleration if US labor market data worsens [6]. - However, there are warnings that unexpected fiscal stimulus measures from Japan or stronger-than-expected US economic performance could undermine expectations for yen appreciation [7].

Core Viewpoint - Goldman Sachs believes that the key conditions for intervention in the foreign exchange market have not yet been met, despite the rising USD/JPY exchange rate approaching 155 [2][4]. Group 1: Market Performance - In October, the USD/JPY increased by approximately 4%, making the yen the worst-performing major currency among G-10 currencies [4]. - The recent poor performance of the yen is primarily driven by Japan's fiscal risk premium and the repricing of short-term interest rate expectations by the Bank of Japan [2][4]. Group 2: Government and Central Bank Actions - Japanese officials have expressed concerns over the rapid and unilateral movements in the foreign exchange market, with Finance Minister Katsunobu Kato stating that they are closely monitoring the situation with a sense of urgency [4]. - The last intervention by the Japanese Ministry of Finance occurred in 2024 at USD/JPY levels of approximately 157.99, 159.45, 160.17, and 161.76 [4]. Group 3: Future Outlook - Goldman Sachs anticipates that the yen will gradually appreciate in the long term as hedging costs decrease and the USD weakens, although this trend could accelerate if U.S. labor market data deteriorates [5]. - Analysts from Bank of America suggest that the USD/JPY may test the 158 level before triggering substantial policy responses, maintaining a year-end forecast of 155 while noting an increased risk of reaching 160 by Q4 2025 [5].

1. Report Industry Investment Rating - Not provided in the content 2. Core Viewpoints of the Report - In the short - term, the index may enter a volatile trend due to the unclear macro - drivers after the earnings season. In the long - term, it is advisable to maintain a long - position on the economy, and it is recommended to allocate long - term contracts of various varieties at low prices [2] - For the short - term, the trading strategy for bonds is bullish, as the implied interest rate of ultra - long bonds is cost - effective. For the medium - and long - term, considering the rising risk appetite and the expectation of economic recovery, it is suggested to hedge T and TL contracts at high prices [3] 3. Summary by Relevant Catalogs 3.1 Stock Index Futures and Spot Market Performance - On October 31, the four major A - share stock indexes adjusted. The Shanghai Composite Index fell 0.81% to 3954.79 points, the Shenzhen Component Index dropped 1.14% to 13378.21 points, the ChiNext Index declined 2.31% to 3187.53 points, and the Science and Technology Innovation 50 Index decreased 3.13% to 1415.53 points. The market turnover was 2349.8 billion yuan, a decrease of 114.5 billion yuan from the previous day [1] - In terms of industry sectors, pharmaceutical biology (+2.42%), media (+2.39%), and commercial retail (+2.08%) led the gains, while communication (-4.07%), electronics (-3.06%), and non - ferrous metals (-2.03%) led the losses [1] - From the perspective of market strength, IM>IC>IH>IF. The number of rising, flat, and falling stocks was 3759, 131, and 1548 respectively. The net inflows of institutional, main, large - scale, and retail investors in the Shanghai and Shenzhen stock markets were - 24.6 billion, - 19.1 billion, 0.4 billion, and 43.3 billion yuan respectively, with changes of +22.1 billion, +10.8 billion, - 22.3 billion, and - 10.5 billion yuan respectively [1] - The basis and basis annualized yields of IM, IC, IF, and IH next - month contracts were 138.47, 88.6, 9.27, - 3.65 points and - 12.81%, - 8.39%, - 1.39%, 0.84% respectively, and their three - year historical quantiles were 24%, 25%, 45%, and 56% respectively [2] 3.2 Treasury Bond Futures and Spot Market Performance - On October 31, the short - term interest rates of interest - rate bonds decreased while the long - term ones increased. Among the active contracts, TS fell 0.02%, TF dropped 0.01%, T rose 0.04%, and TL rose 0.42% [2] - For the current active 2512 contract, the CTD bond of the 2 - year Treasury bond futures was 250012.IB, with a yield change of - 0.5bps, a corresponding net basis of - 0.038, and an IRR of 1.76%. For the 5 - year Treasury bond futures, the CTD bond was 250003.IB, with a yield change of +0.45bps, a corresponding net basis of - 0.057, and an IRR of 1.9%. For the 10 - year Treasury bond futures, the CTD bond was 220019.IB, with a yield change of - 0.5bps, a corresponding net basis of - 0.023, and an IRR of 1.65%. For the 30 - year Treasury bond futures, the CTD bond was 210005.IB, with a yield change of - 2.25bps, a corresponding net basis of - 0.279, and an IRR of 3.14% [3] - In terms of the money market, the central bank's currency injection was 355.1 billion yuan, currency withdrawal was 168 billion yuan, and the net injection was 187.1 billion yuan [3] 3.3 Economic Data - High - frequency data shows that recently, except for the manufacturing sector, the prosperity of each sector is lower than the same period in previous years [9]

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]

Core Viewpoint - The article discusses the evolving dynamics of China's dual circulation economy under new geopolitical conditions, highlighting the interplay between internal and external cycles, with a focus on innovation and domestic demand as key drivers for economic growth [3][4]. Internal Circulation - The financial cycle is in a downward phase, characterized by weak demand relative to supply, leading to increased savings. This situation is exacerbated by real estate adjustments and debt tightening, which have resulted in a decline in rental and cost pressures, thereby improving supply in the real economy [9][10]. - The stock market's rise in China is primarily attributed to a decrease in risk premiums, reflecting improved market expectations, while corporate profit growth has contributed less significantly [3][4]. - The current debt burden is a significant drag on demand, necessitating external support, such as fiscal expansion, to stimulate economic activity and break the deadlock caused by deleveraging [10][39]. Scale Economy and Innovation - The article emphasizes the need for China to reassess its innovation capabilities, particularly in the context of artificial intelligence (AI). The breakthrough of DeepSeek is highlighted as a pivotal moment that has enhanced investor confidence in China's overall innovation capacity [5][15]. - The concept of scale economy is crucial, as it suggests that the development of AI models is currently experiencing diminishing returns, and the ability to generate increasing returns on a broader scale will be key for future advancements [4][21]. - The article posits that technological progress, particularly in AI, is essential for improving productivity and addressing social welfare needs, thereby creating a favorable environment for innovation and consumption [41]. External Circulation - The article notes a significant shift in China's export patterns, with a 25.7% decrease in exports to the U.S. following new tariff policies, while overall export growth remains at 6.4%. This indicates a structural change rather than a total decline in trade [25][26]. - China's exports are increasingly directed towards emerging markets and Belt and Road countries, focusing on capital goods and intermediate products rather than consumer goods, reflecting a strategic pivot in trade relationships [26][30]. - The article suggests that a new model of external circulation is emerging, where China is investing in local markets through loans and direct investments, particularly in green industries, which is expected to be accelerated by the U.S. tariff increases in 2025 [37][38]. Key to Internal Circulation: Stimulating Consumption and Deleveraging - The article argues that stimulating domestic consumption is critical for achieving macroeconomic balance and fostering innovation. Fiscal expansion, particularly in areas related to social welfare, is seen as a vital tool for enhancing consumption demand [39][41]. - The potential implementation of personal credit relief policies is highlighted as a significant step towards alleviating individual debt burdens, which could enhance consumer resilience against economic shocks [40][41].

Report Summary 1. Investment Rating - No investment rating for the industry is provided in the report. 2. Core Views - For stock index futures, maintain a long - term bullish view on the economy, recommend buying long - term contracts of various varieties on dips as stock index long - positions can provide certain excess returns [2]. - For bond futures, short - term is bullish, the implied interest rate of ultra - long bonds is attractive, and the central bank's bond trading sends positive signals; long - term, with rising risk appetite and economic recovery expectations, suggest hedging T and TL on rallies [2]. 3. Section Summaries (1) Stock Index Futures and Spot Market Performance - On October 30, A - share major indices declined: Shanghai Composite Index fell 0.73% to 3986.9 points, Shenzhen Component Index dropped 1.16% to 13532.13 points, ChiNext Index decreased 1.84% to 3263.02 points, and STAR 50 Index declined 1.87% to 1461.3 points. Market turnover was 24,643 billion yuan, up 173.6 billion yuan from the previous day [1]. - In terms of industry sectors, steel (+0.9%), non - ferrous metals (+0.79%), and public utilities (+0.13%) led the gains; communication (-2.83%), electronics (-2.23%), and national defense and military industry (-1.95%) led the losses [1]. - In terms of market strength, IH>IF>IM>IC, with 1,238 stocks rising, 102 flat, and 4,097 falling. Institutional, major, large - scale, and retail investors' net capital inflows were - 46.7 billion, - 29.9 billion, 22.7 billion, and 53.8 billion yuan respectively, with changes of - 50.1 billion, - 25.9 billion, + 30.7 billion, and + 45.2 billion yuan [1]. - The basis of IM, IC, IF, and IH next - month contracts were 120.68, 86.71, 19.91, and 1.61 points respectively, with annualized basis yields of - 10.89%, - 7.93%, - 2.86%, and - 0.36%, and three - year historical quantiles of 34%, 28%, 32%, and 41% [1]. (2) Treasury Bond Futures and Spot Market Performance - On October 30, the bond market had a weak rebound. Among active contracts, TS fell 0.01%, TF was flat, T rose 0.05%, and TL rose 0.19% [2]. - For the current active 2512 contracts, the CTD bond of 2 - year Treasury bond futures was 250012.IB, with a yield change of + 0bps, a corresponding net basis of - 0.049, and an IRR of 1.88%; for 5 - year Treasury bond futures, the CTD bond was 250003.IB, with a yield change of - 1.2bps, a net basis of - 0.023, and an IRR of 1.68%; for 10 - year Treasury bond futures, the CTD bond was 250018.IB, with a yield change of - 1.9bps, a net basis of - 0.026, and an IRR of 1.67%; for 30 - year Treasury bond futures, the CTD bond was 210005.IB, with a yield change of - 2bps, a net basis of - 0.1, and an IRR of 2.14% [2]. - In terms of the money market, the central bank injected 342.6 billion yuan and withdrew 212.5 billion yuan, with a net injection of 130.1 billion yuan [2]. (3) Economic Data - High - frequency data shows that recent social activities, real estate, and infrastructure have lower than usual prosperity, while manufacturing has good prosperity [10].

Market Performance - On October 28, the four major A-share stock indices adjusted. The Shanghai Composite Index fell 0.22% to close at 3988.22 points, the Shenzhen Component Index fell 0.44% to close at 13430.1 points, the ChiNext Index fell 0.15% to close at 3229.58 points, and the STAR 50 Index fell 0.84% to close at 1471.73 points. The market turnover was 2.1653 trillion yuan, a decrease of 191.3 billion yuan from the previous day [2]. - In terms of industry sectors, communication (+0.08%), electronics (-0.37%), and comprehensive (+2.06%) led the gains; media (-0.44%), food and beverage (-0.01%), and real estate (-0.23%) led the losses [2]. - From the perspective of market strength, IM>IF>IC>IH. The number of rising/flat/falling stocks was 2362/170/2904 respectively. In the Shanghai and Shenzhen stock markets, institutional, main, large - scale, and retail investors had net inflows of -15.4 billion, -18.7 billion, 3 billion, and 31.1 billion yuan respectively, with changes of -15.7 billion, -10.8 billion, +3.4 billion, and +23.1 billion yuan respectively [2]. - On October 28, the bond market continued to rebound. Among the active contracts, TS rose 0.08%, TF rose 0.15%, T rose 0.25%, and TL rose 0.55% [3]. Stock Index Futures - The basis of the next - month contracts of IM, IC, IF, and IH were 143.62, 110.03, 22.37, and -1.18 points respectively, with annualized basis yields of -12.31%, -9.61%, -3.06%, and 0.25%. The three - year historical quantiles were 26%, 20%, 30%, and 48% respectively [3]. - In the medium - to - long term, the report maintains the judgment of going long on the economy. Currently, using stock indices as a long - position substitute has certain excess returns. It is recommended to allocate long - term contracts of each variety on dips [3]. Treasury Bond Futures - The current active contract is the 2512 contract. For the 2 - year Treasury bond futures, the CTD bond is 250012.IB, with a yield change of -4bps, a corresponding net basis of 0.005, and an IRR of 1.52%; for the 5 - year Treasury bond futures, the CTD bond is 250003.IB, with a yield change of -3.25bps, a corresponding net basis of -0.047, and an IRR of 1.9%; for the 10 - year Treasury bond futures, the CTD bond is 220017.IB, with a yield change of -3.5bps, a corresponding net basis of -0.047, and an IRR of 1.91%; for the 30 - year Treasury bond futures, the CTD bond is 210014.IB, with a yield change of -3.75bps, a corresponding net basis of -0.038, and an IRR of 1.78% [4]. - In terms of the money market, the central bank injected 475.3 billion yuan and withdrew 159.5 billion yuan through open - market operations, resulting in a net injection of 315.8 billion yuan [4]. - In the short term, it is bullish as the central bank's restart of Treasury bond trading releases a positive signal. In the medium - to - long term, with the upward risk appetite and the expectation of economic recovery, it is recommended to hedge T and TL contracts on rallies [4]. Economic Data - High - frequency data shows that recently, the prosperity of social activities, real estate, and infrastructure is lower than in previous periods, while the manufacturing prosperity is good [11].

Group 1 - The Japanese yen weakened against other G10 and Asian currencies due to positive risk sentiment, with the USD/JPY exchange rate at 152.9600, up 0.07% [1] - Moody's economists predict that the Bank of Japan will likely maintain interest rates this Thursday due to poor trade performance and weak domestic demand, impacting economic outlook [1] - The Nikkei 225 index surpassed 50,000 points for the first time in 75 years, driven by optimism regarding the new Prime Minister's support for stimulus policies and positive news from U.S. trade negotiations [1][2] Group 2 - The Nikkei index's surge followed Prime Minister Kishi's policy speech proposing economic growth stimulation and increased defense spending, coinciding with President Trump's upcoming visit to Japan [2] - The USD/JPY exchange rate is currently between 152.79 and 153.17, with expectations of continued yen weakness due to upcoming risk events, including the U.S. Federal Reserve and Bank of Japan meetings [3] - The USD/JPY may test levels of 154.00 and 154.66 if it breaks above 153.29, as the yen remains under pressure [3]