Group 1 - The overall trend in government bond futures since early April has been characterized by "long strong, short weak," with short-term bonds experiencing significant declines after mid-April, while long-term bonds have maintained a volatile pattern [1] - The market's expectations for interest rate cuts remain, with short-term yields appearing relatively appropriate after previous increases, indicating that the prior rise has exhausted policy space [1][2] - Concerns about the economic outlook persist, particularly regarding real estate and external demand, making long-term bonds more attractive compared to short-term bonds [1][2] Group 2 - The short-term bond market has shown signs of overvaluation, with the yield spread between short-term government bonds and funding rates at historical lows, leading to concerns about the sustainability of short-term bond prices [2] - The basic economic fundamentals are more favorable for long-term bonds, as April's economic data indicates a general decline, making long-term bonds more sensitive to these fundamentals [2] - Investors should closely monitor changes in external demand and monetary policy, particularly regarding the central bank's potential resumption of secondary market government bond transactions, which could impact bond yields [4] Group 3 - The upcoming economic performance, changes in funding conditions, and developments in US-China trade negotiations will significantly influence the bond market in June [3] - The pressure on external demand is expected to gradually affect domestic demand, which could enhance the driving force for a stronger bond market [4] - As of the end of April, foreign investors' holdings of domestic bonds reached 29,781.5 billion yuan, reflecting an increase and indicating a growing interest in Chinese assets amid global market shifts [4]

Group 1: Report's Investment Rating on the Industry - No information provided regarding the report's industry investment rating Group 2: Core Views of the Report - Since 2020, there have been three main scenarios for reserve requirement ratio (RRR) cuts: 1) RRR cuts change the market's expectation of the liquidity situation, catalyzing a decline in bond market interest rates; 2) RRR cuts do not significantly change market expectations and continue the bond market trend, with the yield curve steepening; 3) After RRR cuts, the market's expectation of the liquidity situation changes from loose to tight, and there is upward pressure on interest rates [6][53]. - The impact of RRR cuts on the bond market mainly includes: 1) After RRR cuts, the liquidity rate usually remains stable or drops significantly, and short - term interest rates are likely to decline, with the curve often showing a bull - steepening pattern; 2) In most cases, long - term interest rates decline with RRR cuts and liquidity easing, but there are two exceptions; 3) The scale of other tool injections after RRR cuts is positively correlated with the liquidity rate [6][54]. - The current RRR cut is similar to the second scenario, where it continues the bond market trend and increases the possibility of curve steepening. For long - term interest rates, the catalytic effect of this RRR cut is limited, and they are likely to remain volatile [6][55]. Group 3: Summary Based on the Report's Content 1. Three Scenarios of RRR Cuts Since 2020 - **Scenario 1: Catalyzing Bond Market Interest Rate Decline** - RRR cuts occur after a significant seasonal increase in the liquidity rate. After the RRR cut, the central bank's net injection may decline or increase, but the liquidity rate will eventually return to stability or decline significantly, and long - term interest rates will decline due to the shift from tight to loose monetary expectations [6][53]. - Examples include July 2021, December 2021, December 2022, and March 2023. Before these RRR cuts, the DR007 central rate increased by more than 10bp compared to the historical average. After the RRR cuts, most of the central bank's other liquidity injection tools reduced their scale, and the liquidity rate returned to stability or declined significantly, and long - term interest rates also declined [10][13][18]. - **Scenario 2: Continuing the Bond Market Trend** - RRR cuts do not occur after a sudden tightening of liquidity. After the RRR cut, the central bank's open - market operation net injection scale decreases or remains low, but the liquidity pressure can be effectively hedged. The liquidity rate remains stable or drops significantly, and short - term interest rates decline. The long - term interest rate depends on whether the fundamental expectation can be quickly improved, and there are opportunities to steepen the yield curve [6][53]. - Examples are April 2022, February 2024, and September 2024. After the RRR cuts, the central bank's open - market operation net injection scale decreased, and the liquidity rate remained stable or declined. Short - term interest rates declined, and the impact on long - term interest rates was uncertain, but there were opportunities to steepen the curve [23][28][30]. - **Scenario 3: Upward Pressure on Interest Rates After RRR Cuts** - RRR cuts do not occur after a sudden tightening of liquidity, and are accompanied by a significant increase in other liquidity injections. Usually due to factors such as the Spring Festival and high government bond supply, the liquidity rate increases in the month of the RRR cut. The interest rate trend depends on the persistence of the liquidity tightening [6][53]. - Examples are January 2020 and September 2023. After the RRR cuts, the central bank maintained a high - scale injection, but the liquidity rate still increased. The bond market trend depends on the duration of the liquidity tightening [39][42][47]. 2. Comparison of the Current RRR Cut with Historical Scenarios - The current RRR cut is similar to the second scenario. Since April, the market's expectation of loose money has been restored. In May, although the net financing of interest - bearing bonds has increased marginally, the bank's liability pressure has eased. If the liquidity rate remains stable during the current period, short - term rates such as certificate of deposit (CD) rates may decline further in June [6][55]. - For long - term interest rates, the catalytic effect of this RRR cut is limited, and they are likely to remain volatile. The RRR cut did not occur after a sudden tightening of liquidity or a significant decline in the capital market, and the impact on the market's liquidity expectation is limited. The probability of significant weakening or strengthening of the fundamental expectation after the RRR cut is low [6][55].

Core Viewpoint - The Loan Prime Rate (LPR) has been lowered for the first time this year, with the one-year LPR at 3% and the five-year LPR at 3.5%, both down by 10 basis points from previous values [1][2]. Group 1: LPR Adjustment and Market Expectations - The LPR reduction aligns with market expectations, following a 0.1 percentage point decrease in the policy rate announced by the central bank [1][2]. - Analysts predict further interest rate cuts in the second half of the year, indicating potential for additional LPR declines [1]. Group 2: Impact on Financing Costs - The reduction in the LPR is expected to significantly lower financing costs for both enterprises and residents, stimulating internal financing demand [2]. - Improvements in banks' funding costs, due to previous deposit rate cuts and liquidity management, have facilitated the LPR decrease [2]. Group 3: Deposit Rate Adjustments - A new round of deposit rate cuts has commenced, with state-owned banks reducing various deposit rates, which is anticipated to stabilize banks' net interest margins [3]. - The overall deposit rate is expected to decrease by approximately 0.11 to 0.13 percentage points, offsetting the impact of lower loan rates on banks' asset yields [3]. Group 4: Housing Market Implications - The reduction in the five-year LPR is directly linked to lower mortgage costs, with potential adjustments in housing loan rates in major cities like Beijing [4]. - The adjustment is expected to alleviate repayment pressures for existing homeowners as mortgage rates are re-evaluated [4][6]. Group 5: Support for Housing Demand - The recent decrease in housing provident fund loan rates, alongside the LPR cut, is projected to save residents over 20 billion yuan annually in interest payments, supporting housing demand [5]. - Overall, these financial policy adjustments are seen as beneficial for stabilizing the real estate market and meeting housing needs [6].

Funding Market - The large banks' lending scale rapidly increased in the first half of last week but declined after the reserve requirement ratio cut took effect [1] - The overall funding market cooled down in the past week, with net borrowing amounts turning negative for major borrowers and net lending amounts rising for major lenders [1] - The total repo balance in the interbank market increased, while the leverage ratio in the interbank bond market remained stable [1] Primary Market - The issuance heat in the primary market showed divergence, with one 10-year government bond, two 10-year policy bank bonds, and one 10-year other policy financial bond issued in the past week [1] - The bid-to-cover ratio for government bonds and policy bank bonds decreased, while it increased for other policy financial bonds [1] - The price spread between primary and secondary markets narrowed for government and policy bank bonds, while it widened for other policy financial bonds [1] Secondary Market - The overall heat in the secondary market improved, with an increase in the turnover rate of ultra-long bonds and stronger buying interest for short-term bonds [2] - The total borrowing volume of bonds increased, and the proportion of active bonds rose [2] - Major buyers increased net purchases of short and medium-term bonds while reducing net purchases of long and ultra-long bonds [2] Wealth Management and Fund Scale - Since May, the growth of wealth management scale has been weaker than historical averages, with a cumulative increase of 164.4 billion yuan as of May 18 [3] - The fund scale (net asset value) increased by 83.2 billion yuan in May, with equity and bond funds increasing by 56.1 billion yuan and 25.3 billion yuan respectively [3] - The issuance of new bond funds saw a significant rise compared to the previous week [3]

Core Points - The People's Bank of China (PBOC) has lowered the Loan Prime Rate (LPR) for the first time in 2023, with the one-year LPR set at 3.0% and the five-year LPR at 3.5%, both down by 10 basis points [1][2][3] - Major banks have also reduced their deposit rates, with rates for terms of three years and below decreased by 15 basis points, and rates for three years and above reduced by 25 basis points [1][5][6] - The adjustments in LPR and deposit rates are aimed at reducing the cost of liabilities for banks and providing more room for lending to the real economy [1][6][7] Group 1: LPR Adjustment - The LPR was adjusted downwards by 10 basis points, marking the first reduction of the year and the first since October of the previous year [2][3] - The reduction follows a decrease in the seven-day reverse repurchase rate, which serves as a new pricing anchor for the LPR [2][3][7] Group 2: Deposit Rate Changes - Six major banks, including the "Big Six" and China Merchants Bank, collectively announced a reduction in deposit rates, with the largest cuts seen in longer-term deposits [5][6][7] - The new rates for one-year deposits have fallen below 1%, while rates for three-year and above deposits are now below 1.5% [8][9] Group 3: Impact on Banking Sector - The reduction in deposit rates is expected to help stabilize net interest margins for banks, which have already been under pressure due to declining loan yields [6][7][9] - The banking sector is likely to focus more on reducing non-interest costs in the future, as credit costs have already decreased significantly [8][9]

Core Viewpoint - The People's Bank of China has lowered the Loan Prime Rate (LPR) for both 1-year and 5-year terms, which will lead to a decrease in mortgage rates, particularly for first-time homebuyers, marking a significant shift in the housing market [1][2]. Group 1: Interest Rate Changes - The 1-year LPR has been adjusted from 3.10% to 3.00%, and the 5-year LPR from 3.60% to 3.50%, resulting in a 10 basis point reduction for both [1]. - The average mortgage rate for first-time homebuyers is expected to drop to approximately 2.95%, with some cities potentially seeing rates as low as 2.90% [2]. Group 2: Impact on Housing Market - The reduction in mortgage rates is anticipated to lower housing costs, thereby stimulating demand for home purchases [3]. - The average weighted mortgage rate for new commercial personal housing loans in Q1 2025 was reported at 3.11%, with first-time homebuyer rates around 3.06% [2]. Group 3: Economic Context and Future Outlook - The recent interest rate cuts are part of a broader strategy to support the economy, particularly in light of weak external conditions and a challenging employment landscape [5]. - Analysts suggest that the current monetary policy will continue to trend towards greater easing, indicating a sustained period of lower interest rates [8]. - There is an expectation for additional supportive policies for the real estate market, including financial measures linked to housing sales and urban renewal initiatives [9].

Core Viewpoint - The Loan Prime Rate (LPR) has been lowered for the first time in 2025, with the one-year LPR at 3.00% and the five-year LPR at 3.50%, both down by 10 basis points from previous levels [1][3]. Group 1: Impact on Financing Costs - The reduction in LPR is expected to lower financing costs for both enterprises and residents. For instance, a 10 basis point decrease in LPR would reduce the monthly payment by approximately 54 yuan and the total repayment amount by around 20,000 yuan for a 1 million yuan mortgage over 30 years [3]. - The recent reduction in public housing loan rates by 0.25 percentage points may create a favorable environment for further adjustments in commercial housing loan rates, thereby reducing the overall cost for homebuyers [3]. Group 2: Market Expectations and Reactions - The market had anticipated this adjustment, following the central bank's announcement of comprehensive "interest rate cuts" measures, including a 10 basis point reduction in the 7-day reverse repurchase rate and a 0.5 percentage point reduction in the reserve requirement ratio [4]. - Major banks, including Industrial and Commercial Bank of China and Agricultural Bank of China, collectively lowered deposit rates across various products, with the one-year fixed deposit rate reduced by 15 basis points to 0.95% [4]. Group 3: Future Outlook - Analysts suggest that if policy rates and deposit rates continue to decline, there remains potential for further reductions in LPR, with future adjustments needing to balance multiple economic objectives [6].

Report Summary 1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Core Viewpoints - Maintain the conclusion that "funding may be looser than expected." Although short - term fluctuations occur in the current funding situation, the optimistic expectation for liquidity should not change, and there is still room for the funding price to decline [2]. - The bank's liability growth has returned to normal, and the objective environment for funding regulation has changed. The so - called "central bank's attitude" speculated by institutions is unreliable, and the central bank's attitude has also changed [3]. - After the RRR cut, the easing effect had been overdrawn before the actual implementation. The comprehensive impact of released funds and the overdrawn effect on the actual implementation day may not lead to an obvious change in the lent funds [3]. - The impact of government bond payments and the maturity of repurchase agreements exists, but the replacement of high - cost funds with cheaper RRR - cut funds still has an easing effect [3]. - There will be support from excess structural tools in the future, including a confirmed increase of 1.1 trillion in various re - loans and the possible re - activation of PSL, which has shrunk by 1.3 trillion since 2024 [4]. 3. Summary by Directory 1. How to View the Tightening of Funds after the RRR Cut - **Previous Views on the Bond Market and Funds**: Microscopically, the bond market is recovering; macroscopically, there are still opportunities in the bond market. The key to the subsequent bond market trend is whether the funding price center can break through 1.4%. There is a possibility that the funding will be looser than expected [10]. - **Current Situation of Funds after the RRR Cut**: The RRR cut was implemented on May 15th, and the funding tightened marginally. The funding price center dropped to around 1.5% after the RRR cut was announced in early May, but did not decline further after May 15th [11]. - **Reasons for Not Being Pessimistic about the Funding**: - **Change in the Bank's Liability Environment**: The bank's liability growth has returned to normal, and the so - called "central bank's attitude" speculated by institutions is unreliable. Even if the central bank continues to regulate, the funding center will be lower than before [14]. - **Overdrawn Easing Effect**: Before the actual implementation of the RRR cut, the easing effect had been overdrawn. The actual scale of the RRR cut may be affected by the change in the deposit base, and the lent funds may not change significantly on the implementation day [16]. - **Impact of Other Factors**: The large - scale government bond payments in the short term will consume excess reserves, and the maturity of repurchase agreements also needs to be considered. However, the replacement of high - cost funds with cheaper RRR - cut funds still has an easing effect [17]. - **Support from Structural Tools**: There will be support from excess structural tools in the future, including a confirmed increase of 1.1 trillion in various re - loans and the possible re - activation of PSL, which has shrunk by 1.3 trillion since 2024 [20]. - **Conclusion**: It is not advisable to be pessimistic about the funding. In most cases, the funding price will decline in the two weeks after the RRR cut. The bank's liability has returned to normal, and the central bank's attitude has also returned to stable and loose [22].

Group 1: Market Data - DROO1 closed at 1.63 with a 21.93bp increase, DR007 at 1.64 with an 11.29bp increase, GC001 at 1.51 with a 13.50bp increase, and GC007 at 1.56 with a 2.00bp increase [4] - SHBOR 3M closed at 1.65 with a 0.90bp decrease, LPR 5 - year at 3.60 with no change [4] - 1 - year, 5 - year, and 10 - year Chinese government bonds closed at 1.45, 1.55, and 1.68 respectively, with increases of 1.94bp, 1.14bp, and 0.71bp; 10 - year US Treasury bonds closed at 4.43 with a 2.00bp decrease [4] - Last week, the central bank conducted 486 billion yuan of reverse repurchase operations, with 836.1 billion yuan of reverse repurchase and 125 billion yuan of MLF maturing, resulting in a net withdrawal of 475.1 billion yuan [4] - This week, 486 billion yuan of reverse repurchase will mature, with 4.3 billion, 18 billion, 9.2 billion, 6.45 billion, and 10.65 billion yuan maturing from Monday to next Friday [5] Group 2: Stock Index Quotes - The CSI 300 closed at 3889 with a 0.46% decrease, the SSE 50 at 2717 with a 0.86% decrease, the CSI 500 at 5716 with a 0.01% increase, and the CSI 1000 at 6068 with a 0.18% increase [6] - IF, IH, IC, and IM contracts also showed corresponding price changes and volume and position changes [6] - Last week, the CSI 300 rose 1.12% to 3889.1, the SSE 50 rose 1.22% to 2716.7, the CSI 500 fell 0.1% to 5715.8, and the CSI 1000 fell 0.23% to 6068.1 [6] - In the Shenwan primary industry index, non - bank finance (2.5%), automobile (2.4%), transportation (2.1%), basic chemicals (1.8%), and comprehensive (1.7%) led the gains last week, while computer (-1.3%), national defense and military industry (-1.2%), media (-0.8%), electronics (-0.7%), and social services (-0.5%) led the losses [6] Group 3: Economic Data and Market Analysis - In April, the domestic inflation level remained low, with CPI down 0.1% year - on - year, core CPI up 0.5% year - on - year, and PPI down 2.7% year - on - year with a 0.2 - percentage - point increase in the decline [7] - Financial data was weaker than seasonal. In April, new social financing was 1.16 trillion yuan, weaker than market expectations; the year - on - year growth rate of social financing stock was 8.7%, up 0.3 percentage points from the previous month [7] - In April, new RMB loans in the financial caliber were 280 billion yuan, 450 billion yuan less than the same period last year, and government bonds continued to provide support; the year - on - year growth rate of M1 was 1.5%, down 0.1 percentage points from the previous month [7] - Due to the under - performance of social financing and inflation data in April, the fundamental driving force for the stock index is still weak. After the first - stage Sino - US tariff negotiation, the stock index has recovered the technical gap, and the need for Central Huijin to support the market has weakened. It is recommended to reduce long positions and be vigilant against adjustment risks [7] Group 4: Futures Premium and Discount - The IF, IH, IC, and IM contracts showed different premium and discount rates for different contract periods [8]

Group 1 - The People's Bank of China announced a 0.5 percentage point reduction in the reserve requirement ratio for financial institutions, effective from May 15, which is expected to provide approximately 1 trillion yuan in long-term liquidity to the market [1] - The reserve requirement ratio indicates the proportion of deposits that financial institutions must hold as reserves with the central bank, impacting their ability to lend [1] - The targeted reserve requirement reduction policy aims to encourage specific financial institutions to increase credit lending to key sectors such as agriculture and small enterprises, thereby supporting their development [1] Group 2 - The reduction in reserve requirements allows banks to have more funds available for loans, which can stimulate production and improve the availability of high-quality goods and services for consumers [2]