Core Insights - The Federal Reserve is signaling a potential early end to its quantitative tightening (QT) policy, with Chairman Powell indicating that the reduction of the balance sheet may stop when reserves are slightly above what is deemed sufficient [1][2] - Analysts suggest a clear policy roadmap: interest rate cuts are currently happening, followed by the cessation of QT, and potentially a new round of quantitative easing (QE) starting in early 2026 [1][2] Economic Pressures - The U.S. job market is showing signs of distress, with companies announcing 946,426 layoffs this year, a 55% increase compared to the same period in 2024, marking the highest level since 2020 [2] - The housing market is under significant pressure, with searches for "mortgage assistance" reaching their highest level since the 2008 financial crisis, and current mortgage rates at approximately 6.3%, more than double the 3% rates locked in by many homeowners during 2020-2021 [2] Balance Sheet Status - The Federal Reserve's balance sheet remains far from normal levels, currently at $6.6 trillion, down only $2.2 trillion since the start of QT in June 2022, which is only a 27% reduction from pre-pandemic levels of about $4 trillion [3][6] - Powell's comments suggest a new "normal" for the balance sheet, which is 60% higher than pre-pandemic levels, indicating a shift in expectations for future monetary policy [6] QE Implications - The potential restart of QE from a high balance sheet level of $6.6 trillion, rather than a more normalized $4 trillion, could lead to double-digit inflation, as the system is still saturated with liquidity from the pandemic [7] - Investors may need to prepare for high inflation and new asset price volatility as the Fed's monetary expansion resumes [7]

Core Viewpoint - The Federal Reserve is set to conclude its quantitative tightening program, marking the end of large-scale financial market interventions initiated in March 2020 due to the COVID-19 pandemic. The Fed aims for the market to operate independently while returning to traditional interest rate tools to stimulate or cool the economy [5][6]. Summary by Sections Quantitative Easing and Tightening - To counter the economic impact of the pandemic, the Federal Reserve implemented quantitative easing, purchasing trillions of dollars in securities to maintain low long-term interest rates, which expanded its balance sheet to nearly $9 trillion. Since 2022, the Fed has reversed these measures through quantitative tightening, reducing its balance sheet by $2.2 trillion [6]. Bank Reserves and Economic Signals - The Fed intends to reduce bank reserves from "ample" to "adequate," but determining the end point for quantitative tightening remains challenging. Currently, bank reserves account for about 10% of nominal GDP. The Fed is cautious to avoid a repeat of the 2007-2009 financial crisis, where a significant drop in bank reserves led to market volatility [7]. Market Reactions and Future Expectations - Experts suggest that the end of quantitative tightening may be interpreted by the market as a sign of the Fed's intention to boost the economy. Some traders might view this as another economic stimulus measure [7][8]. Concerns Over Liquidity - There are warnings that the current state of the money market indicates the Fed may be repeating past mistakes of excessive liquidity withdrawal. Some analysts argue that the Fed has allowed too much reserve to dissipate and should resume purchasing Treasury securities to replenish market liquidity [8]. Future Monetary Policy - The Fed has indicated that it does not currently see the need to increase its securities purchases, with predictions that it will not expand its balance sheet before the end of 2026. However, it will monitor year-end financing costs closely to respond to market pressures if necessary [8][9]. Caution in Future Interventions - The Fed's experience with previous rounds of bond purchases has made it more cautious about using quantitative easing as a monetary policy tool. Critics argue that such interventions leave a significant footprint in financial markets. The Fed is unlikely to face a situation requiring a return to quantitative easing in the foreseeable future, as current economic conditions are more likely to present inflationary pressures rather than deflationary ones [9].

Core Points - The Federal Open Market Committee (FOMC) is expected to conclude its meeting on October 29, 2025, with a press conference by Chairman Powell at 2:30 PM ET [1] - Traders and economists are highly confident that the Federal Reserve will lower interest rates to a range of 3.75-4.00%, with a 98% probability of a 25 basis point cut [1][3] - The focus will shift to the Fed's monetary policy statement and Powell's press conference to gauge potential market changes following the expected rate cut [3] Interest Rate Expectations - The market anticipates a gradual decline in U.S. interest rates, with a 95% confidence level for another 25 basis point cut in December [3] - The FOMC's path for the remainder of the year appears set unless unexpected circumstances arise [3] - The expected rate cut may not significantly support the economy due to challenges from immigration and AI replacing human labor [3][4] Quantitative Tightening (QT) - A key point of interest in the upcoming FOMC meeting is whether the Fed will announce an end to its QT program, which involves allowing certain debt holdings to mature and reducing the balance sheet [5] - Ending QT could be perceived as a stimulus to the economy, potentially boosting risk-sensitive assets like equities and high-yield currencies while negatively impacting bonds and the dollar [6] Economic Commentary - Fed officials express caution regarding further rate cuts, indicating limited space for additional easing unless there is a deliberate shift towards inappropriate loosening [8] - Concerns about inflation and inflation expectations are highlighted by various Fed officials, suggesting a careful approach to policy adjustments [8] Currency Market Analysis - The USD/JPY currency pair is seen as a pure reflection of U.S. economic trends, with recent price action indicating a potential downward movement towards the 150.00 support level [9] - Any unexpected actions from the FOMC or the Bank of Japan could invalidate current technical strategies [9]

Core Viewpoint - The bond market is experiencing significant volatility, with a notable divergence between interest rate bonds and credit bonds, driven by recent central bank actions and market sentiment [3][5][10]. Group 1: Market Reactions - A pure bond fund heavily invested in 30-year government bonds is projected to face a loss of 53-81 basis points, a stark contrast to typical daily fluctuations [1]. - The 10-year government bond yield saw a slight recovery of 1 basis point after a drop, but overall, it has decreased by 3 basis points over two days, raising questions about the market's optimistic sentiment despite some pullback [3][5]. - The central bank's announcement on October 27 to restart government bond trading has altered market dynamics significantly, likened to turning on a water faucet for a thirsty person [3][7]. Group 2: Institutional Divergence - There is a clear divide in institutional strategies, with fund companies favoring long-duration interest rate bonds while banks and insurance firms focus on credit bonds for yield [9][15]. - The bond market has seen a substantial increase in trading volume, with both interest rate and credit bonds experiencing a rise in transaction numbers, indicating a flow of capital into the bond market [9][17]. Group 3: Central Bank Operations - The central bank's dual approach of restarting government bond trading and conducting a 900 billion yuan MLF operation is reminiscent of quantitative easing strategies used by foreign central banks [7][10]. - Market participants are closely monitoring the central bank's actions, with a strong expectation of continued monetary easing reflected in the performance of long-duration interest rate bonds [10][15]. Group 4: Market Sentiment and Liquidity - The bond market's volatility has decreased post-lunch, transitioning from excitement to a more rational outlook, with discussions around potential pricing distortions due to ongoing central bank purchases [12][15]. - There is a noticeable liquidity stratification in the bond market, where large institutions can access funds easily, while smaller non-bank entities face higher financing costs, creating a structural imbalance [15].

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 People's Bank of China (PBOC) is set to resume open market operations for government bonds, indicating a positive outlook for the bond market and a focus on liquidity management [1][4][5]. Group 1: Market Operations - The PBOC's bond trading is primarily aimed at liquidity adjustment and serves as a supplementary tool for open market operations, which are designed to regulate the total amount of base currency [3][6]. - The resumption of government bond trading is seen as a crucial step in enhancing the financial functions of government bonds and improving the pricing capabilities of financial institutions [4][5]. Group 2: Economic Implications - The increase in government bond issuance this year, coupled with the resumption of bond trading, is expected to stabilize bond market interest rates and enhance long-term liquidity supply [5][9]. - Analysts predict that the 10-year government bond yield may decline to around 1.6% amid a lack of large-scale consumption stimulus measures [8]. Group 3: Legal and Structural Context - The legal framework allows the PBOC to buy and sell government bonds in the secondary market, which is distinct from direct purchases in the primary market [6][7]. - The PBOC's bond trading is fundamentally different from quantitative easing (QE) practices in developed economies, as it is not a response to exhausted conventional monetary policy tools [7].

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report - Last week, oil prices were strong, erasing all losses since October due to US sanctions on Russia. In the current market, US sanctions on Russia have reduced expectations of a broader supply, but the upcoming OPEC+ ministerial meeting in early November may lead to increased production, and US oil storage plans may also increase supply, which could suppress oil prices. Financially, the market expects interest rate cuts after the release of US September CPI data, which may relieve macro - economic pressure. Politically, the change in US policy towards Russia may boost oil prices in the short - term, but its long - term impact is uncertain. Overall, oil prices may have limited upside in the short - term and be under pressure in the long - term [13][73]. 3. Summary by Directory 3.1 Operation Ideas - Last week, oil prices rose due to sanctions on Russia, erasing losses since October. This week, oil prices may remain strong, but with limited upside due to the upcoming OPEC+ meeting and US oil storage plans. It is recommended to focus on the price range of 450 - 495 yuan/barrel, make short - term long positions cautiously, and take short positions on rallies in the long - term [13]. 3.2 Market Review - Last week, the US sanctioned two Russian oil companies, reducing market expectations of a broader supply and causing oil prices to rise. The deterioration of US - Russia relations may also prevent an effective cease - fire in the Russia - Ukraine conflict in the short - term, which also contributed to the rise in oil prices [20]. 3.3 Fundamental Analysis 3.3.1 Macro - economic Factors - **Inflation Data**: In September, US inflation data was lower than expected. The unadjusted CPI annual rate was 3%, and the core CPI also showed a downward trend, which boosted market confidence and increased expectations of interest rate cuts [24]. - **Interest Rate Expectations**: The release of inflation data increased market expectations of interest rate cuts in the remaining two FOMC meetings this year and next year [24]. - **Labor Market**: The suspension of ADP providing employment data to the Fed may increase concerns about the US labor market [32]. - **Geopolitical Tensions**: The cancellation of the planned US - Russia meeting and new sanctions on Russian oil exports, as well as US military actions near Venezuela, may lead to higher oil prices due to geopolitical risks [37]. 3.3.2 Supply Factors - **OPEC+ Production**: OPEC+ countries generally increased production in September, with Saudi Arabia having the largest increase of 248 thousand barrels per day [41]. - **US Sanctions**: US sanctions on Russia may affect oil supply. - **Other Producers**: Iran and Iraq also increased production, while the US had a small production cut [46][49]. 3.3.3 Demand Factors - **Weak Consumption**: Consumption performance remained weak, and the manufacturing PMIs of the US and China did not improve [52][56]. - **Slowing Refining**: The production of refined oil products continued to slow down [62]. 3.3.4 Inventory Factors - **Crude Oil Inventory**: US crude oil inventories unexpectedly decreased in the week ending October 22, which supported oil prices [63]. - **Refined Oil Inventory**: US refined oil inventories decreased, but due to low refinery utilization and the off - season of consumption, it was difficult to boost oil prices [67]. 3.4 Viewpoint Summary - In the short - term, oil prices may have some upside due to the deterioration of US - Russia relations, but considering the OPEC+ meeting and US oil storage needs, the upside is limited, and oil prices are under pressure in the long - term [73].

撇开目前的技术调整不谈，笔者认为黄金正在经历一次再定价过程。 高市早苗如愿以偿，就任日本第104任首相，却意外让黄金价格急跌。高市上台充满悬念，"高市交 易"最近才发力，日元对美元汇率跌至152。美元指数上涨，成为压垮黄金的最后一根稻草，黄金白银价 格出现了一轮坍塌式下挫，恐慌指数也回落到16。经过一轮去杠杆，资金重回股市，全球股市齐涨，日 经225领涨。美债略有下跌，静待美联储降息一码。 黄金正在经历一次再定价过程 黄金价格进入调整期，上周初伦敦金价每盎司急跌近300点，既触发了市场恐慌，也带出金价见顶的言 论。金价在六个星期内暴涨超过1000点，出现技术性回调再正常不过。笔者认为，这是一场迟来的调 整，市场因为FOMO（踏空恐惧）而推迟了早该发生的调整。美元汇率上升、地缘政治缓和以及杠杆盘 退出，带来了这轮急跌。 今年以来金价上涨了57%，是各大类资产中表现最突出的。其背后主要逻辑是，黄金作为另类资产在资 产配置中的地位明显上升。央行增加了黄金配置，作为对美元、美债风险的对冲;基金增加了黄金ETF 的配置，作为对美国财政赤字和地缘政治风险的对冲；消费者增加了黄金配置，作为对通货膨胀和法币 失信的对冲。美联 ...

Group 1 - The recent appointment of Fumio Kishida as Japan's Prime Minister has led to a significant drop in gold prices, attributed to a stronger US dollar and a decline in geopolitical tensions [1][2] - Gold prices have experienced a sharp decline after a substantial increase of over 1000 points in six weeks, indicating a normal technical correction following a period of rapid growth [1][2] - Year-to-date, gold prices have risen by 57%, outperforming other asset classes, driven by increased allocations from central banks, funds, and consumers seeking to hedge against inflation and currency devaluation [1][2] Group 2 - Central banks, once sellers of gold due to its lack of yield, are now the primary buyers, reflecting a loss of confidence in fiat currencies [2][3] - The revaluation of gold is underway as investors seek alternatives to US Treasuries, which are losing their status as a zero-risk asset due to rising US government deficits and geopolitical tensions [2][3] - The last significant revaluation of gold occurred in the early 2000s with the introduction of gold ETFs, which made gold investment more accessible and supported a bull market [2][3] Group 3 - Despite rising policy interest rates from various central banks, the era of credit expansion is not over, as countries continue to pursue deficit-driven growth [3][4] - Kishida's government is expected to maintain fiscal expansion policies, potentially increasing the fiscal deficit while supporting economic growth [4][5] - The Bank of Japan is unlikely to raise interest rates soon, as the current political landscape suggests a preference for a weaker yen to support economic stability [5]

Group 1 - The core of the recent market shift is the simultaneous bullish stance on Chinese assets by major Wall Street firms like Goldman Sachs and JPMorgan Chase, indicating a significant change in market sentiment [1][5] - The Nasdaq Golden Dragon Index, which tracks Chinese stocks, surged by 1.66%, with major companies like Alibaba, Baidu, and JD.com seeing substantial gains, reflecting a revival in the Chinese internet sector [3][5] - In the oil market, WTI crude oil prices rose sharply, surpassing $61.79, while Brent crude approached $66, indicating increased costs for consumers and potential inflationary pressures [5][6] Group 2 - Goldman Sachs recently predicted a 30% increase in the Chinese stock market by 2027, while Morgan Stanley noted that global funds remain under-allocated to Chinese assets, suggesting significant upside potential [5][6] - The market's enthusiasm is partly driven by expectations that the Federal Reserve may ease monetary policy, with indications that quantitative tightening could end soon, potentially leading to a resumption of quantitative easing [5][6] - For investors, there are notable opportunities in the Chinese stock market, with Alibaba's stock rebounding over 30% from its lows, and oil prices currently down nearly 30% from last year's peak, presenting a chance for cost savings [6]