Core Viewpoint - The article discusses the challenges of making investment decisions in the face of market fluctuations and the tendency to hope for a return to previous price levels, which can hinder timely actions [1]. Group 1: Market Conditions - The central bank conducted a significant operation with 1,658 billion yuan in 7-day reverse repos and 6,000 billion yuan in 14-day reverse repos, resulting in a net injection of 4,115 billion yuan into the market [3][5]. - The interbank funding rates showed a notable decline, with DR001 dropping over 15 basis points to around 1.32% and DR007 decreasing by 7 basis points to approximately 1.53% [3]. - The 10-year government bond yield fluctuated slightly, closing at 1.799% after reaching a low of 1.795% during the day [5][6]. Group 2: Financing Trends - The interbank certificates of deposit have seen a negative net financing for four consecutive months, which is expected to set a record for the longest continuous net repayment period [6]. - The reasons for this trend include a large amount of maturing debt, an increase in recent issuance rates from 1.6% to 1.7%, and weak loan demand [6]. Group 3: Bond Market Performance - The bond market exhibited mixed performance, with the sentiment being cautious in the morning session, leading to slight increases in yields [5]. - The trading volume for various repo rates showed significant changes, with R001 at 25,029.28 billion yuan, down by 36,410.45 billion yuan, and R007 at 31,317.05 billion yuan, up by 28,680.99 billion yuan [4][8].

Report Industry Investment Rating No relevant content provided. Core View of the Report - In previous bond bull years since 2019 (excluding 2020), the bond market often reached a low point in August. This year, considering fundamentals, institutional behavior, and bond supply, the previous "anti - involution" trading in the bond market has cooled marginally. Related policies will mainly raise the interest rate fluctuation center, and the probability of driving a significant upward movement in interest rates is low. With the central bank's positive attitude towards protecting the capital market, bond market interest rates are expected to remain volatile [5][23]. Summary by Related Catalogs 1. Review of August Market Trends in Previous Years - **2019**: Intensified Sino - US trade friction pushed bond market interest rates down. However, in August, inflation data exceeded expectations, and financial data also exceeded expectations. The Sino - US trade negotiation showed signs of easing, and the TMLF was absent in October, causing bond market interest rates to rise from August to October [7]. - **2021**: The central bank's full - scale reserve requirement ratio cut in early July led to abundant liquidity and a decline in bond market interest rates. In August, the issuance of local bonds increased, and positive signals from the State Council executive meeting and the increase in new re - loan quotas in September raised expectations of broad credit and drove up interest rates [7]. - **2022**: Multiple rounds of reserve requirement ratio cuts and interest rate cuts led to loose liquidity and a decline in bond market interest rates. In August, the State Council executive meeting proposed an additional 300 billion yuan in policy - based and development - oriented financial instruments, and the PMI entered the expansion range in September, causing bond yields to rise [7]. - **2023**: Disappointing economic data in May and multiple interest rate cuts led to a decline in bond market interest rates. Starting from late August, a series of real - estate stabilization policies were introduced, and economic data in August was better than expected, causing bond market interest rates to rise [8]. - **2024**: The central bank's interest rate cut in July drove bond market interest rates down. In August, the Jiangsu branch of the People's Bank of China required rural commercial banks to pay attention to long - bond holding risks, and the central bank's second - quarter monetary policy implementation report mentioned medium - and long - term interest rate risks, causing interest rates to rise [10]. 2. Reasons for the Frequent Appearance of Inflection Points in August 2.1 Fundamental Factors - After the Politburo meeting in July, a series of growth - stabilizing policies are usually introduced around August, leading to a "first - down - then - up" bond market trend. However, based on this year's Politburo meeting, the probability of interest rate cuts in the short term is low, and the possibility of introducing incremental policies this year is small, with limited impact on the bond market [11][12]. 2.2 Institutional Behavior Factors - From September to the fourth quarter, it is usually the redemption period for wealth management products, increasing the pressure on bond market adjustments. The correlation between the stock market and the bond market strengthens during external shocks, but in other cases, the direct impact of the stock market's rise on the bond market is limited, and the suppression of the bond market by the stock market is expected to gradually weaken [14][15]. 2.3 Supply Factors - Around August, the supply of local bonds is usually large, which is negative for the bond market. However, this year, the issuance rhythm of local special bonds has advanced, and the issuance speed from July to September may be relatively smooth, resulting in limited marginal supply pressure on the bond market in August [18][19]. 3. Outlook on the Current Market - **Fundamentals**: The possibility of introducing incremental policies this year is small, with limited impact on the bond market [22]. - **Institutional Behavior**: The bond - allocating power of wealth management products usually declines marginally from August to September, which may put upward pressure on the bond market. The suppression of the bond market by the stock market is expected to gradually weaken [22]. - **Bond Supply**: The marginal supply pressure on the bond market in August is limited [22].

Core Viewpoint - The recent policy adjustment by the Ministry of Finance and the State Taxation Administration to reinstate VAT on interest income from newly issued government bonds, local government bonds, and financial bonds starting August 8 is expected to have a significant impact on institutional behavior and the bond market dynamics, leading to a widening spread between new and old bonds [3][4][7]. Summary by Sections Policy Changes - Starting August 8, interest income from newly issued government bonds, local government bonds, and financial bonds will be subject to VAT, with a rate of 6% for banks and 3% for asset management products. Existing bonds issued before this date will remain exempt from VAT until maturity [3][4][6]. Market Reactions - Following the announcement, the bond market reacted with a quick rise in yields, followed by a sharp decline, reflecting mixed investor sentiment regarding the tax implications [5][8]. Institutional Impact - Financial institutions, particularly banks, are expected to adjust their investment strategies in response to the new tax regime. The certainty of tax liabilities on interest income may lead banks to increase their external investment scale to mitigate the impact on returns [11][12]. Tax Revenue Projections - The tax adjustments are projected to generate additional tax revenue of approximately 321 billion, 648 billion, and 988 billion from 2025 to 2027, respectively. In a steady state, the annual tax revenue could reach about 208.6 billion if the current bond stock is taxed [9][10]. Spread Dynamics - The policy is likely to create a widening spread between new and old bonds, as the new bonds will carry a tax burden that the older bonds do not. This could lead to a dual pricing mechanism in the market, with institutions favoring older bonds to avoid the new tax implications [10][13][14]. Long-term Market Trends - The tax changes may lead to a structural shift in the bond market, with funds potentially flowing towards credit assets and equities, as the attractiveness of taxable bonds diminishes. The overall impact on bond yields is expected to be limited, with estimates suggesting a yield impact of around 5 to 10 basis points [12][14].

Core Viewpoint - The article emphasizes the importance of recognizing and seizing investment opportunities while avoiding risks, highlighting the current market dynamics in the bond and stock sectors. Group 1: Market Overview - The funding environment is balanced and slightly loose, with long-term bond yields showing a significant upward trend [1] - The central bank conducted a 2,148 billion yuan 7-day reverse repurchase operation, with a net withdrawal of 2,477 billion yuan today [1] - The funding rates continue to decline, with DR001 around 1.31% and DR007 around 1.47% [1] Group 2: Bond Market Performance - The sentiment in the bond market remained stable in the morning, with the 10-year government bond yield opening at 1.677% and showing strong fluctuations [3] - The bond market experienced a sell-off, with bond funds continuing to redeem, pushing the yield up to 1.692% [3] - The 10-year government bond yield reached a correction high of around 1.7%, the highest since April 7, indicating a need to observe support levels [3] Group 3: Stock Market Dynamics - The stock market and commodities performed strongly, with news of the National Energy Administration ordering the suspension of overproducing coal mines, leading to a surge in prices for coking coal and polysilicon [2][3] - The Shanghai Composite Index recorded five consecutive days of gains, reaching a new high for the year [3] - The article critiques the reliance on fiscal measures, suggesting that shutting down a few mines can significantly impact inflation and market performance [3]

Group 1 - The article discusses the concept of false breakouts in trading, suggesting that recognizing these can lead to more confident counter-trading actions [1] - It highlights the current macroeconomic environment, indicating a balanced and slightly loose funding situation with a small decline in long-term bond yields [1][3] - The People's Bank of China (PBOC) conducted a 7-day reverse repurchase operation of 291.1 billion yuan, with a net injection of 148.6 billion yuan after 142.5 billion yuan of reverse repos matured [1][2] Group 2 - The U.S. appellate court temporarily reinstated Trump tariffs, contributing to a weak stock market and a slight decline in bond market rates [2][3] - The 10-year government bond yield opened slightly lower and fluctuated, with the lowest rate reaching 1.667% before closing at 1.675% [3][4] - Market participants were closely monitoring the central bank's announcements regarding bond purchases, although no such operations were conducted, leading to a slight rebound in rates [3][4]

Report Industry Investment Rating No relevant content provided. Core View of the Report - The time point for the certificate of deposit (CD) interest rate to return to a downward trend may be earlier than market expectations. Despite the existence of factors such as increased supply of interest - bearing bonds, deposit rate cuts, and the end - of - June factor that cause marginal tightening pressure on the capital market, the market has made preparations. The outflow of bank deposits due to rate cuts may increase the demand for CD allocation, and the CD issuance rhythm and bank behavior also support the earlier return of CD rates to a downward trend. If so, it will also bring a repair opportunity for the bond market interest rate to decline steeply [4][7][9]. Summary According to the Directory 1 Fixed Income Market Observation and Thinking - Market concerns about the upward risk of CD interest rates have resurfaced, mainly due to increased supply of interest - bearing bonds, deposit rate cuts increasing bank liability pressure, and the end - of - June factor. However, the market has prepared, and the CD interest rate may return to a downward trend earlier than expected [4][7]. - Deposit rate cuts may lead to bank deposit outflows, but the funds are likely to enter fixed - income asset management products, increasing CD allocation demand and potentially pushing CD rates down [4][7]. - From the perspective of CD issuance rhythm, if banks expect tight funds at the beginning of the year and increase CD financing, the CD rate may decline earlier when facing the end - of - June factor [4][8]. - Bank behavior shows that the slowdown in the expansion pressure of inter - bank liabilities relative to assets helps stabilize CD rates [4][8]. 2 Fixed Income Market Outlook 2.1 This Week's Attention and Important Data Release - This week, China will release the official manufacturing PMI for May, the US will release the core PCE for April, and the eurozone will release the industrial sentiment index for May [17][18]. 2.2 This Week's Interest - Bearing Bond Supply Scale Estimation - This week, it is expected to issue 328.2 billion yuan of interest - bearing bonds, which is at a relatively low level compared to the same period. There are no treasury bond issuance plans, 39 local bonds are planned to be issued with a scale of 228.2 billion yuan, and the actual issuance scale of policy - based financial bonds is expected to be around 100 billion yuan [18]. 3 Interest - Bearing Bond Review and Outlook 3.1 Central Bank's Injection and Capital Market Conditions - The central bank's reverse repurchase volume increased, with a total injection of 946 billion yuan, and the MLF roll - over was 500 billion yuan, resulting in a net injection of 120 billion yuan in the open market after considering maturities. The capital market interest rate fluctuated more, with the trading volume of inter - bank pledged repurchase falling, and the overnight proportion averaging around 87%. The capital interest rate declined but still had large intraday fluctuations [23][24]. - The CD issuance scale rebounded, and the interest rate increased. From May 19th to May 25th, the issuance scale was 714.3 billion yuan, the maturity scale was 738.3 billion yuan, and the net financing was - 24 billion yuan. The issuance and interest rates of different types of banks and different maturities also changed [30][31]. 3.2 The Bond Market Continues to Rise After Exhausting Positive Factors - Last week, long - term interest rates mainly rose, while medium - and short - term interest rates continued to decline slightly. Factors included large intraday fluctuations in capital interest rates, strong profit - taking sentiment after the dual cuts, and a significant increase in the issuance price of ultra - long - term primary treasury bonds. On May 23rd, the yields of 1 - year, 3 - year, 5 - year, 7 - year, and 10 - year treasury bonds changed by - 0.2bp, - 0.9bp, - 1.0bp, - 1.6bp, and 3.3bp respectively compared to the previous week [40]. 4 High - Frequency Data - On the production side, most of the operating rates declined, such as the blast furnace operating rate, semi - steel tire operating rate, and petroleum asphalt operating rate, while the PTA operating rate increased. The average daily crude steel production in early May decreased year - on - year [49]. - On the demand side, the year - on - year growth rates of passenger car manufacturers' wholesale and retail sales remained positive, land trading volume increased, and the sales area of commercial housing in 30 large - and medium - sized cities increased, with a year - on - year growth rate of about - 9%. The SCFI and CCFI composite indices changed by 7.2% and 0.2% respectively [49]. - In terms of prices, crude oil prices declined, copper and aluminum prices diverged, coal prices diverged, and the prices of building materials, cement, and glass in the middle reaches also declined. Vegetable and fruit prices in the downstream consumption sector declined slightly, while pork prices remained flat [50].

Core Viewpoint - The scale of bank wealth management has returned to historical highs, reaching 31.33 trillion yuan in May, marking a significant recovery after the redemption wave in 2022 [1] Group 1: Wealth Management Scale Trends - The bank wealth management scale typically experiences a "quarter-end decline and quarter-beginning recovery" pattern, with a notable increase of 2.05 trillion yuan in April 2025, aligning with seasonal trends [2] - The growth in April is attributed to a strong bond market and a "deposit migration" effect due to multiple small and medium-sized banks lowering deposit rates [2] - As of April 2025, the top three institutions in wealth management scale are China Merchants Bank Wealth Management, Xinyu Wealth Management, and Xinyin Wealth Management, with significant growth observed in major state-owned banks [5][6] Group 2: Yield and Performance of Wealth Management Products - The average annualized yield of pure fixed-income wealth management products rose to 3.35% in April, while the proportion of products below par decreased to 0.5% [3] - Despite a slight recovery in yields, the performance benchmark for newly issued wealth management products continues to decline, with benchmarks for various durations showing decreases compared to March [3][4] - Analysts predict that the yields of fixed-income wealth management products may drop to around 2% due to historically low bond yields [4] Group 3: Future Outlook and Challenges - A new round of deposit rate cuts is expected to drive further growth in wealth management scale, potentially reaching 33 trillion yuan by the end of the year [7] - However, challenges remain as low credit bond yields may reduce the attractiveness of wealth management products, and regulatory changes could increase net asset value volatility [7][8] - The dynamics of the stock and bond markets, along with the impact of regulatory reforms on investor experience, will significantly influence the future growth of wealth management scale [8]

Core Viewpoint - The People's Bank of China (PBOC) has adopted a new MLF (Medium-term Lending Facility) operation model starting March, which includes fixed quantity, interest rate bidding, and multiple price bidding, resulting in a net liquidity injection of 630 billion yuan, marking the first excess renewal since July 2024 [1][2][3]. Group 1: MLF Operation Changes - Starting March 2025, the PBOC will implement a fixed quantity, interest rate bidding, and multiple price bidding approach for MLF to ensure ample liquidity in the banking system and meet diverse funding needs of different institutions [2]. - The upcoming MLF operation on March 25, 2025, will involve 4500 billion yuan for a one-year term, with 3870 billion yuan maturing, leading to a net liquidity injection of 630 billion yuan [2]. - This marks the first time since July 2024 that the PBOC has restored net MLF injections, indicating a shift from a net withdrawal of funds to a more accommodative monetary policy stance [3]. Group 2: Market Expectations and Policy Signals - The Q1 monetary policy meeting emphasized the need to observe and assess the bond market's operation, reflecting the PBOC's focus on long-term yield changes and its willingness to stabilize liquidity expectations [4]. - The recent MLF operation and the return to net injections signal a commitment to easing monetary policy, which may improve the likelihood of a decline in long-term bond yields [8]. - The PBOC's approach to MLF, including the multiple price bidding, suggests potential room for interest rate cuts, which could help reduce the funding costs for commercial banks [5][8]. Group 3: Future Outlook - The MLF is expected to regain its status as a conventional liquidity tool, while the buyout reverse repos may continue to serve as the primary channel for medium to long-term liquidity supply [6]. - Although the current MLF operation has resulted in a net injection, the PBOC may gradually continue to withdraw MLF in the future, indicating a balanced approach to liquidity management [7]. - Overall, the PBOC's toolbox appears sufficient to cover both short-term and long-term liquidity needs, suggesting a more efficient and precise liquidity management strategy moving forward [7].