1. Report Industry Investment Rating No relevant content provided in the report. 2. Core View of the Report - The current adjustment of the dividend yield has alleviated the pressure of the over - valued bond market, and the odds have increased marginally. The current cost - performance advantage of bonds is gradually emerging, which may provide a more favorable valuation support environment for the phased layout of interest - rate bonds [7][18]. - The liquidity environment provides a relatively stable operating foundation for the bond market. The social financing growth rate may peak in the third quarter and then decline trend - wise, and the expected impact of structural changes on the bond market is limited. The bond market faces a relatively friendly liquidity environment [7][24]. - The central bank has clearly shown its attitude of protecting liquidity, and the money market is expected to return to a balanced and loose state. The yield of the 10 - year Treasury bond may decline to around 1.6%. It is recommended to pay continuous attention to the yield curve and various convex point opportunities, and the spread may continue to be flattened in late July. It is advisable to first focus on interest - rate bonds and Tier 2 capital bonds, and then on credit bonds [7][34]. 3. Summary by Relevant Catalogs Recent Bond Market Callback - From July 7th to July 16th, the yields of the bond market generally increased. The yields of the 10 - year and 30 - year Treasury bonds increased by 2bp and 3bp respectively, and the short - end yields increased more significantly. The adjustment of Tier 2 capital bonds was more obvious [5][12]. Bond Market Odds Gradually Rising - The adjustment of the dividend yield has alleviated the pressure of the over - valued bond market, and the odds have increased marginally. The decline of the CSI 300 dividend yield from the May average of 3.47% to 3.0% on July 14th is conducive to the inflow of funds into the bond market [7][18]. - The liquidity environment provides a stable foundation for the bond market. The social financing growth rate is expected to reach a high of about 9.0% in July and then decline to around 8.2% by the end of the year. The support of government bonds for social financing may weaken in the fourth quarter, and the substitution effect of special refinancing bonds on RMB loans will continue. The central bank will implement a moderately loose monetary policy, and the bond market's liquidity environment is friendly [7][24]. 10 - year Treasury Bond Has Certain Odds Above 1.65%, Recommend First Interest - rate and Tier 2 Capital Bonds, Then Credit Bonds - Due to the disturbance of the money market at the beginning of the quarter and the strengthening of the equity market, the Tier 2 capital bonds and credit bonds with previously compressed spreads have given back their gains, especially the medium - and long - term and some medium - and low - grade varieties. However, the core logic of Tier 2 capital bonds has not changed [33]. - Since July 10th, the central bank has shifted to net investment in open - market operations. The money market is expected to return to a balanced and loose state, and the yield of the 10 - year Treasury bond may decline to around 1.6%. It is recommended to seize the layout opportunities after the adjustment, with medium - and short - term varieties as the basis for coupon income, and medium - and high - grade 3 - 5 - year varieties having better elasticity in interest - rate band operations [34].

1. Report Industry Investment Rating The provided content does not mention the report's industry investment rating. 2. Core Viewpoints of the Report - The bond market has a winning probability but lacks odds. It is recommended to allocate 10 - year Treasury bonds around a 1.65% yield on dips and to focus on the allocation opportunities of 3 - 5 - year credit bonds [2][8][46]. - The winning probability of the bond market depends on the trend factors in marginal changes, mainly the fundamentals and the supply - demand situation of funds. Currently, the fundamentals face downward pressure, and low prices may further develop, while factors such as fiscal deposit release, central bank net injection, and weak entity financing demand will lead to a decline in capital prices [8][16]. - The bond market lacks odds because it has fully priced in various positive factors, and the 10 - year Treasury bond yield has deviated significantly from the model results. Also, the scope and rhythm of monetary policy suggest that there is limited room for a significant decline in interest rates [8][39]. 3. Summary According to the Catalog Bond Market Has a Winning Probability - **Fundamentals**: Under the disturbance of trade frictions, the fundamentals face further downward pressure, and low prices may further develop, meaning the bond market lacks a basis for correction. In April, both manufacturing and non - manufacturing PMI declined month - on - month, and international crude oil prices dropped, putting direct pressure on prices [16][17]. - **Funds**: In the second quarter, the concentrated release of fiscal deposits, the central bank's resumption of net injection, and weak entity financing demand will jointly lead to a decline in capital prices. Fiscal deposit growth in February and March was the highest since February 2024, and government bond net financing in 1 - 4 months was much higher than in previous years. However, government bond net financing declined in April, and the central bank resumed net injection in mid - to - late April [27][28]. Bond Market Lacks Odds - **Pricing of Positive Factors**: The bond market has fully priced in various positive factors. The 10 - year Treasury bond yield has deviated significantly from the model results, indicating that the bond market has fully priced in factors such as the decline in capital prices and trade frictions in advance [39]. - **Monetary Policy**: Whether the tight pressure on narrow - sense liquidity is further transmitted to social financing is the key for the central bank to increase liquidity injection or cut the reserve requirement ratio. Under the assumption of an 8.2% annual social financing growth rate and M2 growth rate returning to the social financing growth rate, the central bank needs to cut the reserve requirement ratio by 50bp and inject 1.8 trillion yuan of base money. The central bank's future focus may be on the innovation of structural monetary policy tools [43].