1. Report Industry Investment Rating There is no information provided regarding the industry investment rating in the given content. 2. Core View of the Report In the last week of October, despite fluctuations in funds due to tax - period outflows and Beijiao Stock Exchange new - share subscriptions, the funds smoothly crossed the month under the central bank's active support. With the easing of Sino - US tariff disputes and the central bank's announcement to restart treasury bond trading, bond yields oscillated strongly and the yield curve steepened. Throughout the week, the yield of the 1 - year treasury bond active bond dropped by 9BP to 1.38%, the yield of the 10 - year treasury bond active bond dropped by 5.25BP to 1.7925%, and the 30 - year treasury bond yield dropped by 6.65BP to 2.1460% [5][8]. 3. Summary According to the Directory (1) Interest - rate Bond Market Review: Easing Sino - US Tensions and Central Bank's Restart of Treasury Bond Trading Lead to a Bullish and Steep Bond Market - In the last week of October, affected by tax - period outflows and Beijiao Stock Exchange new - share subscriptions, funds fluctuated but crossed the month smoothly under the central bank's support. The easing of Sino - US tariff disputes, the post - meeting market reaction of the heads of state, and the central bank's restart of treasury bond trading led to an oscillating and strengthening of bond yields and a steepening of the curve. The 1 - year, 10 - year, and 30 - year treasury bond yields all declined [5][8]. - The central bank made a large - scale net injection of 14008 billion yuan this week. Affected by tax - period outflows and frozen funds from Beijiao Stock Exchange new - share subscriptions, the funds' prices first rose and then fell. The 1 - year treasury bond active bond yield dropped by 9BP to 1.38% [5][9]. - **Monday (October 27)**: Positive signals from Sino - US - Malaysia trade negotiations led to a strong performance in the equity market. After an initial 1BP upward pricing of negative news in the bond market, yields gradually declined driven by the news of the MLF tender rate cut. At the end of the session, multiple positive factors such as the central bank's announcement to restart treasury bond trading led to a short - term decline of 4 - 5BP in the 10 - year and 30 - year treasury bond yields [5][9]. - **Tuesday (October 28)**: The central bank made a net injection of 3158 billion yuan in the morning. The Shanghai Composite Index broke through 4000 points, suppressing bond market sentiment. In the afternoon, the bond market showed differentiation, with long - term and ultra - long - term yields rising 1 - 2BP, while 1 - 3 - year varieties declined overall, and credit bonds performed strongly [2][9]. - **Wednesday (October 29)**: The central bank made a net injection of 4195 billion yuan in the morning. The Shanghai Composite Index held steady at 4000 points. The bond market showed differentiation between short - and long - term bonds, with 1 - 3 - year treasury bond yields dropping 3 - 4BP, and 10 - year and 30 - year bonds remaining stable [2][9]. - **Thursday (October 30)**: The central bank made a net injection of 1301 billion yuan in the morning. After the Sino - US summit, the equity market showed a "buy - the - rumor, sell - the - news" pattern, and the Shanghai Composite Index fell below 4000 points. Most yields of major interest - rate bonds declined, and the curve flattened compared to the previous day [2][9]. - **Friday (October 31)**: The manufacturing PMI in October unexpectedly dropped to around 49, indicating weak fundamental recovery. The equity market was weak, the technology sector corrected significantly, and the new regulations on public fund redemptions might be relaxed. The bond market sentiment was strong, and the 10 - year treasury bond yield dropped to 1.7925% [2][9]. (2) Funding Situation: The Central Bank's OMO Made a Large - scale Net Injection, and the Funding Situation was in a Stable and Balanced State The central bank made a large - scale net injection of 14008 billion yuan this week. Affected by tax - period outflows and frozen funds from Beijiao Stock Exchange new - share subscriptions, the funds' prices first rose and then fell. The high points of DR001 and DR007 weighted prices were 1.4687% and 1.5818% respectively, and the issuance price of 1 - year national and joint - stock bank certificates of deposit dropped to around 1.63% [5][9]. (3) Primary Issuance: Net Financing of Policy - based Financial Bonds and Local Bonds Increased, while Net Financing of Treasury Bonds and Inter - bank Certificates of Deposit Decreased There is no detailed data and analysis provided in the content about the increase in net financing of policy - based financial bonds and local bonds and the decrease in net financing of treasury bonds and inter - bank certificates of deposit. (4) Benchmark Changes: The Term Spread of Treasury Bonds Widened, and the Term Spread of Policy - based Financial Bonds Narrowed - In terms of the change in the yield curve shape, the term spread of treasury bonds widened, and the term spread of policy - based financial bonds narrowed. Specifically, the short - term yields of treasury bonds dropped by 8.90BP, and the short - term yields of policy - based financial bonds dropped by 5.50BP. The long - term yields of treasury bonds dropped by 5.32BP, and the long - term yields of policy - based financial bonds dropped by 7.59BP. Short - term treasury bonds performed better than long - term ones, while the opposite was true for policy - based financial bonds. - In terms of the absolute level of term spreads, the 10Y - 1Y spread of treasury bonds widened by 3.58BP to 41.28BP, and the 10Y - 1Y spread of policy - based financial bonds narrowed by 2.09BP to 33.84BP [22].

Core Viewpoints - Global capital allocation is shifting from an over-concentration in US stocks to a more balanced approach, with Hong Kong stocks transitioning from value investment to growth investment [1][7] - The recent easing of US-China tariff tensions has led to a recovery in market risk appetite, with significant reductions in bilateral tariffs [3][17] Focused Commentary - The US and China have made substantial progress in trade negotiations, reducing tariffs by 91% on both sides, which has boosted market confidence and led to a rally in both US and Hong Kong stock markets [3][4] - The easing of tariffs is expected to benefit export-oriented companies, particularly in sectors like consumer electronics and automotive parts [5][6] Equity Market Insights - In the context of tariff reductions, export-oriented companies are likely to see improved performance, with a focus on sectors such as consumer electronics, components, machinery, and automotive parts [5] - The manufacturing sector's dominance in the economy is expected to continue, with a shift towards resource and utility dividend stocks, as well as banks and steel [6][7] - Hong Kong stocks are anticipated to attract more domestic investment, leading to a shift in investment logic towards growth stocks, particularly in the mid-cap and small-cap segments [7] Industry Research - The pharmaceutical sector is expected to experience a dual boost in performance and valuation due to policy optimization and technological innovation, with a focus on innovative drugs and medical devices [12] - The automotive industry is showing signs of recovery, with increased orders and strong performance in the new energy vehicle export sector [14] Macro and Fixed Income - The easing of US-China tariff tensions may lead to a cautious outlook for the bond market, with limited upward movement in long-term interest rates [17] - Continued monetary policy easing is anticipated, which may support the bond market despite a lack of effective financing demand in the real economy [18][19] Asset Allocation - A barbell strategy is recommended for asset allocation, balancing investments in technology and cyclical sectors with long-term dividend stocks, while also considering short-duration bonds due to potential declines in bond yields [21]

Report Industry Investment Rating No investment rating information is provided in the report. Core Viewpoints - Short - term bullish steepening logic in the bond market is not sound. It is expected to fluctuate in the short - term. The main line of loose monetary policy remains unchanged in the medium - term. After the implementation of reserve requirement ratio cut and interest rate cut, the curve bullish steepening will open up further downward space for long - term bond yields [1][3][29]. Summary by Related Catalogs Why the short - term bullish steepening logic is not sound - From April 11th to April 16th, 2025, after the bond market priced in the hedging of tariff shocks by stable - growth policies, it turned to a fluctuating state. The yield curve showed a mixed flat trend. The yield of the 10 - year active treasury bond fluctuated between 1.63% - 1.67%. The yield of the 2 - year active treasury bond rose from 1.38% to 1.425%. The long - term and ultra - long - term bond buying sentiment was suppressed, and the gaps in treasury bond futures TL and T contracts were nearly filled. The money market rate started to rise on April 11th [10]. - **Difference 1: Central bank's attitude and policy implementation rhythm** - Under RMB exchange - rate pressure, the central bank's current attitude is restrained. In 2020, during the public health event, the central bank quickly used reserve requirement ratio and interest rate cut tools, resulting in a rapid decline in money market rates. This time, due to RMB depreciation pressure, the central bank has net - withdrawn liquidity in the open market in the past two weeks. The overnight and 7 - day money market rates are still above the policy rates, and the money market is in an overall balanced state [11]. - In the next stage, monetary policy may be more coordinated with fiscal policy, and the implementation rhythm of reserve requirement ratio and interest rate cut expectations may be slow. The central bank's restrained loosening restricts the downward space of short - term bond yields and also limits the downward space of long - term and ultra - long - term bond yields due to the low term spread and flat curve [11][12]. - **Difference 2: External environment and domestic economic situation** - The current external environment is more complex and severe, but China's ability to handle trade frictions has improved. The average contribution rate of domestic demand to economic growth in the past five years has exceeded 80%. The proportion of exports to the US in total exports has dropped from 19.2% in 2018 to 13.5% in the first three months of 2025. China's economic dependence on external demand and the dependence of external demand on US exports have both declined [17]. - The economy had a good start in Q1, with domestic demand continuously warming up under policy promotion. Many economic indicators such as social financing, consumption, and industrial added value exceeded market expectations. The impact of tariff negotiations on the Q2 economy needs further observation. Policies in Q2 are expected to focus on boosting consumption, expanding investment, and stabilizing employment [17][18]. - **Difference 3: Uncertainty of tariff policy** - In 2020, the impact of the public health event on the capital market showed a "double - bottom" feature. In this tariff shock, the US's counter - tariffs and China's counter - measures basically occurred at the same time, and the market on April 7th had fully reflected this expectation. However, due to the unpredictability of Trump's policies and the complexity of tariff negotiations, whether there will be a secondary impact of tariffs on asset prices remains to be seen [25]. - **Strategy thinking** - Considering the exchange - rate stability constraint, the central bank's operations are currently restrained. Before the implementation of reserve requirement ratio and interest rate cuts, the possibility of a significant loosening of the money market is low. The current long - term and ultra - long - term bond yields are close to their previous lows. The bond market may fluctuate in the short - term. In the medium - term, after the implementation of the double cuts, the curve bullish steepening will open up further downward space for long - term bond yields [3][29].