Core Viewpoint - June is identified as a critical transitional period for the bond market, with a focus on the downward trend of general interest rates leading to stronger bond market rates, and the increasing certainty of looser funding around the quarter-end [1][4][11]. Group 1: Market Performance - Since early May, the bond market has entered a transitional phase under funding constraints, with a gradual compression of spreads [1]. - The credit spread, particularly at the short end, has compressed to historical lows, while the spread between government bonds and policy bank bonds turned negative in late May [1][4]. - The spread between active and less active 10-year government bonds has narrowed significantly, indicating a clear trend of spread compression in the market [1][4]. Group 2: Investment Recommendations - It is recommended to focus on 10-year and 30-year non-active government bonds, including new and old special government bonds, as well as 10-year local government bonds, which offer both liquidity and static returns [1]. - For credit bonds, attention should be given to high-rated (AAA) credit bonds with a maturity of over five years that possess certain liquidity [1]. - Credit bond ETFs that are eligible for general pledged repos are also suggested for consideration [1]. Group 3: Strategic Transition - The bond market is expected to transition from a pure coupon strategy to a strategy that balances coupon and liquidity [1][11]. - The next phase of spread compression may lead to either a bear market driven by macro policy shifts or a rapid rise in bond prices if government bond rates decline sharply [11]. - The recommendation is to prepare for a shift to more liquid instruments in anticipation of the next round of interest rate declines, considering the uncertainty of funding fluctuations at the end of June [11].

1. Report Industry Investment Rating No information provided in the given content. 2. Core Views of the Report - The bond market has entered a volatile period without obvious drivers. The short - term impact of the current economic fundamentals on the bond market is limited, and the short - end has fully reacted to the loose funds. The stock - bond seesaw effect is not significant [1][2]. - After the interest rate cut, although the short - end benefits may gradually spread to the long - end, the 10 - year bond has no significant downward space. The bond market has entered a spread - mining market [3]. - In terms of different maturities, the rotation pattern of government bonds from short - end to medium - end to ultra - long - end is obvious. In terms of different categories, attention should be paid to the catch - up opportunities of other varieties after the high - liquidity varieties take the lead [4][5]. 3. Summaries According to the Table of Contents 3.1 Bond Market Enters a Volatile Period without Obvious Drivers - **Fundamentals**: The economic data in April is divergent. Exports are still strong, but the PMI reflects a downward expectation. The second - quarter fundamentals may face some disturbances, and the short - term impact on the bond market is limited [1]. - **Monetary Policy**: The favorable monetary policy has been implemented, and the funds are loose. The short - end has fully reacted, and the subsequent downward breakthrough of funds still needs to be observed [1]. - **Equity Market**: After the double - cut this time, the equity market has performed steadily, and the stock - bond seesaw effect is not significant [2]. 3.2 Bond Market Strategy: How to Compress Spreads in the Volatile Period? - Although the short - end benefits may spread to the long - end, the 10 - year bond has no significant downward space. The previous low may be an important resistance level [3]. - In terms of different maturities, government bonds show a rotation pattern from short - end to medium - end to ultra - long - end. In terms of different categories, attention should be paid to the catch - up opportunities of other varieties after the high - liquidity varieties take the lead [4][5]. 3.3 Interest - Rate Bond Market Review: After the Reserve Requirement Ratio and Interest Rate Cuts, the Yield Curve Steepens - **Funding**: The central bank's OMO has a large - scale net withdrawal, and the funding is balanced and loose [8]. - **Primary Issuance**: The net financing of government bonds and inter - bank certificates of deposit has increased, while that of policy - bank bonds and local government bonds has decreased [8]. - **Benchmark Changes**: The term spreads of government bonds and CDB bonds have both widened [8].