Core Viewpoint - The bond market is experiencing a downturn despite a bullish stock market, with rising yields indicating a lack of interest in bonds compared to previous years [1][3][7]. Group 1: Market Performance - On August 18, the Shanghai Composite Index rose above 3700 points, while bond yields increased, with the 10-year government bond yield approaching 1.80% and the 30-year yield surpassing 2.0% [1]. - Since April, the stock market has seen significant gains, while bond yields have shifted from a downward trend to an upward one, particularly in long-term bonds [3][7]. Group 2: Factors Influencing Bond Market - The low coupon rates of bonds have diminished their attractiveness, leading to a lack of interest from institutional investors [4][5]. - Analysts suggest that the bond market's decline is influenced by multiple factors, including rising risk appetite due to stock market performance and improved economic expectations [3][4]. Group 3: Institutional Investment Dynamics - Insurance companies are increasingly seeking higher returns, with their average net investment yield dropping from 5.35% in 2017 to 3.6% in 2024, making bonds less appealing [5]. - The lack of incremental funds in the bond market is evident, as insurance and banking sectors have shifted their focus towards equities and long-term investments [5][8]. Group 4: Future Outlook - The long-term logic of the bond market remains tied to fundamental economic conditions, but short-term dynamics are shifting towards asset allocation strategies [7][8]. - Current market sentiment indicates a sensitivity to negative factors, with a potential for further declines unless there is a reversal in fundamental and monetary conditions [8].

Market Overview - Major A-share indices weakened, with the ChiNext Index down over 1%, the Shanghai Composite Index down 0.2%, and the Shenzhen Component Index down 0.59%. Nearly 2,900 stocks in the Shanghai, Shenzhen, and Beijing markets declined [1] - Government bond futures mostly opened higher, with the 30-year main contract up 0.04%, the 10-year main contract up 0.01%, the 5-year main contract up 0.02%, and the 2-year main contract flat [1] Bond Market Insights - The 30-year government bond ETF (Boshi 511130) opened high and fluctuated throughout the day, with a slight increase of 3 basis points and a trading volume of nearly 600 million yuan, indicating active trading [1] - Overnight SHIBOR, although showing a small decrease, remains at a low level around 1.3000%, below last year's peak, suggesting a shift in institutional strategies as the previous heavy bets on low interest rates are being corrected [1] - Beijing Shichuang Futures noted that since mid-April 2025, government bond futures have been lackluster, with low volatility and limited opportunities for both bulls and bears, but a potential upward space is expected in Q3 [1] Economic Context - The average loan interest rate in Q1 2025 remains high at 3.75%, with the actual interest rate estimated at 4.52%, which is considered restrictive for the economy, especially in a deflationary context [2] - Market expectations for interest rate cuts have been tempered, with only a 10 basis point cut occurring on May 7, despite earlier predictions of a 30-40 basis point reduction [2] - Factors influencing the slow pace of rate cuts include stable economic conditions, minimal tariff impacts, ongoing fiscal policy effects, and external pressures from the US Federal Reserve's delayed rate cuts [2] Future Outlook - There is an expectation that the Federal Reserve may initiate rate cuts in Q3, which could lead to a more aggressive domestic monetary policy response, potentially benefiting government bond futures [3] - The Boshi 30-year government bond ETF, established in March 2024, tracks the "Shanghai 30-Year Government Bond Index" and is sensitive to interest rate changes, making it a noteworthy investment option [3]