Group 1: Sovereign Debt Market Overview - The sovereign debt market in 2025 has seen the highest yields for 30-year government bonds in Germany, France, and the Netherlands since the 2011 Eurozone crisis, with UK yields reaching the highest level since 1998 [1] - A new vicious cycle is emerging where concerns over sovereign debt are driving up yields, increasing borrowing costs for governments, and leading to larger fiscal deficits and more bond issuance [1] Group 2: Japan's Bond Market Dynamics - Japan's 30-year government bond yields have reached their highest level since issuance in 1999, rising nearly 100 basis points since the beginning of the year [2] - The volatility in Japan's bond market is attributed to the Bank of Japan's monetary policy adjustments, including the end of negative interest rates and a significant reduction in bond purchases [4][5] - Concerns over Japan's fiscal situation have intensified, with political instability further exacerbating market fears [6] Group 3: European Sovereign Debt Concerns - Germany's bond yields have surged due to increased defense spending and the loosening of fiscal constraints, while France faces political turmoil affecting its budget proposals [7][8] - The UK has seen its 30-year bond yields rise to 5.75%, the highest since 1998, driven by expectations of increased taxation and government spending to address fiscal challenges [8] Group 4: Global Interest Rate Trends - Despite entering a rate-cutting cycle, long-term sovereign bond yields continue to rise, indicating a market re-evaluation of sovereign creditworthiness [10] - The persistent high inflation in major economies, particularly the US, has led to a "Higher for Longer" narrative for long-term rates, impacting developed nations' bond yields [10][11] - Concerns over fiscal sustainability and political instability in Europe are contributing to upward pressure on long-term yields, particularly in the UK [11]

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In October, the trading sentiment in the bond market recovered, with the interest rate oscillation range significantly lower than in September. Overall, the trading willingness of funds significantly recovered, while allocation players seized the opportunity to exit the market. The potential for a year - end "rush to allocate" seasonal bond market rally is uncertain, and the restoration of allocation players' strength remains doubtful. The high duration of bond funds also poses risks [1][10][45]. 3. Summary by Directory 3.1 10月：债市修复期，各类机构在买卖什么？ - **Market Situation**: In October, the trading sentiment in the bond market recovered, and the interest rate oscillation range was significantly lower than in September. The main bond market trend remained unclear, and various factors successively affected the market trend, with the interest rate generally maintaining a range - bound oscillation [10]. - **Overall Institutional Behavior**: The trading willingness of funds significantly recovered, with the average daily net purchase of spot bonds turning positive for the first time since July, reaching 176 million yuan. The average daily net selling of rural commercial banks increased from 148 million yuan in September to 253 million yuan. Although insurance and large - scale banks maintained net purchases, their average daily net purchase amounts decreased from 182 million yuan to 143 million yuan and from 193 million yuan to 50 million yuan respectively [10]. 3.1.1 大行：全面加大3Y以内短债净买入力度，平衡持仓久期 - **Reason for Behavior**: After large - scale banks bought long - term treasury bonds and policy - financial bonds in September, they shifted to comprehensively increasing the net purchase of short - term bonds within 3 years in October, possibly to balance the duration of their holdings [16]. - **Specific Buying Behavior**: In October, large - scale banks further strengthened the net purchase of 1 - 3Y old treasury bonds (the average daily net purchase increased to 6.7 billion yuan). They also significantly increased the net purchase of new and old treasury bonds within 1 year and new 1 - 3Y treasury bonds (the average daily net purchase increased to 1.6 billion yuan, 5 billion yuan, and 2.4 billion yuan respectively). The average daily net purchase of 7 - 10Y old treasury bonds and old policy - financial bonds decreased to 400 million yuan and 500 million yuan respectively [17]. - **Purchase Rhythm and Annual Data**: The peak of large - scale banks' net purchase of treasury bonds within 3 years occurred between the 20th and 28th. After the central bank announced it would resume bond - buying, the scale of large - scale banks' net purchase of short - term bonds declined. From January to October this year, large - scale banks' cumulative net purchase of 1 - 3Y treasury bonds was 88.61 billion yuan, exceeding 78.16 billion yuan in the same period last year; the cumulative net purchase of treasury bonds within 1 year also reached 43.55 billion yuan. The central bank's resumption of bond - buying may not necessarily mean that large - scale banks need to replenish their positions on a large scale in the secondary market, and the positive impact on short - term varieties may converge [20]. 3.1.2 农商行和保险：趁修复之际快速持续卖出 - **Rural Commercial Banks**: In October, the net selling of rural commercial banks spread from long - term and ultra - long - term to short - term bonds. The selling pressure on 7 - 10Y policy - financial bonds was the greatest throughout the month. They closely followed the interest rate for "buying high and selling low" operations, with the selling intensity significantly greater than the buying intensity. The average daily net selling of long - term and ultra - long - term interest - rate bonds increased from 90 million yuan in September to 700 million yuan, but the net selling intensity was weaker than in June, another repair period [28]. - **Insurance Companies**: In October, the average daily net selling of 20 - 30Y treasury bonds by insurance companies reached a new high since 2023, with the average daily net selling scale reaching 210 million yuan. The net purchase of 20 - 30Y local government bonds decreased significantly, which is in line with the rule that their purchase volume closely follows the supply volume [33]. 3.1.3 基金：积极参与信用二永票息与国开 - 国债利差策略 - **Seeking Spread Trading Opportunities**: During the previous bond market adjustment, ultra - long - term bonds, Tier 2 capital bonds, and policy - financial bonds favored by funds generally faced significant selling pressure, opening up spread spaces. In October, funds began to seek spread trading opportunities for these bonds. The buying intensity for 7 - 10Y policy - financial bonds and 7 - 10Y other bonds (mainly Tier 2 capital bonds with a remaining maturity of 2 - 5Y) was the strongest, with the total net purchase scale in the month reaching 6.84 billion yuan and 4.54 billion yuan respectively. They remained cautious about ultra - long - term bonds, with the net purchase of treasury bonds over 10 years only at 1.94 billion yuan throughout the month [38]. - **Exploring Short - Term Spread Trading Space**: On October 31, the spot bond data showed that the net purchase of 3 - 5Y policy - financial bonds by funds jumped to 970 million yuan. As the positive impact of the central bank's resumption of bond - buying on short - term treasury bonds weakened, funds may start to explore the spread trading space between short - term policy - financial bonds and treasury bonds [38]. - **Selecting Coupon Assets**: Since there was still no major trend in the bond market, some funds actively selected coupon assets to seek the certainty of coupon income. In October, the total net purchase of credit bonds by funds increased from 1.42 billion yuan in September to 13.26 billion yuan, the highest since July, but still lower than in the second quarter [38]. 3.2 11月：会有年末抢配行情出现吗？ - **Uncertainty of Allocation Players' Restoration**: The restoration of the bond - allocation strength of rural commercial banks and insurance companies is likely to be limited, and the timing for allocation players to enter the market is more focused on quarterly timing. The year - end "rush to allocate" seasonal bond market rally may not reappear this year [46]. - **Uncertainties for Large - Scale Banks**: The potential for large - scale banks to undertake bond purchases faces uncertainties such as liability - side instability, profit - taking demands, and pressure on interest - rate risk indicators. Although the supply of ultra - long - term bonds in the fourth quarter is expected to be lower than in the second and third quarters, and the pressure on interest - rate risk indicators is expected to ease, there are still potential uncertainties, including the large - scale maturity of high - interest time deposits in the fourth quarter, the possible acceleration of credit issuance, and the banks' profit - taking demands in the fourth quarter [47]. - **High Duration Risk of Bond Funds**: The duration of bond funds remains at a historically high level, and their risk - resistance ability is relatively weak. If the official draft of the new regulations on fund sales fees is implemented at the end of the year, or if funds are redeemed by banks and wealth management products for other reasons, there is a possibility of a negative feedback loop due to the concentrated release of duration risk. However, the market currently has limited pricing for this risk, and there may not be many foreseeable negative factors in November. More attention can be paid to whether there will be regulatory and stimulus policy expectations in December [49].

Report Industry Investment Rating The document does not provide the report industry investment rating. Core Viewpoints - In the short - term, the bond market may continue to fluctuate within a range. The major factors such as Sino - US tariff game, central bank's reserve requirement ratio and interest rate cuts, and new regulations on fund sales fees remain uncertain, causing the bond market to fluctuate repeatedly. The market has fully priced the stable capital situation and is relatively insensitive to the fundamentals, so the bond market lacks a clear downward momentum. Attention should be paid to the potential emotional impact under the expectation of the implementation of the new regulations on public fund sales fees. One should try to seize intervention opportunities during adjustments but handle it with a cautious and oscillatory mindset [24]. - The spread trading may gradually enter the second half. The market's pre - emptive trading in bond - swapping may come to an end as a whole, and the further compression space of the "CDB - Treasury bond" spread needs to continuously observe the buying momentum of the allocation portfolio [24]. Summary by Directory 1. Bond Market Review: Stable Funds, Fluctuating Bond Market - **10 - year Treasury Bond's "N" - shaped Trend**: This week, the bond market fluctuated mainly following factors such as Sino - US tariff game, expectations of new regulations on fund sales fees, central bank's reserve requirement ratio and interest rate cuts, and restart of bond purchases. The 10 - year Treasury bond active bond yield showed an "N" - shaped trend. In the early part of the week, the easing of tariff game boosted market risk appetite and led to bond market adjustments. Then, the expectation of reserve requirement ratio and interest rate cuts dominated the market, with the long - end warming up significantly, showing a "stock - bond double - bull" situation. In the second half of the week, the upcoming Sino - US economic and trade consultations in Malaysia, combined with the "14th Five - Year Plan" opening up the market's imagination of subsequent policies and the decline of broad - money expectations, put pressure on the bond market again under the "stock - bond seesaw" effect [8]. - **Stable Funds Support the Bond Market**: This week, although the expectations of "double cuts" were dashed, the capital situation remained balanced and loose. Limited disturbances and previous large - scale outright reverse repurchase injections, along with a relatively stable rhythm of reverse repurchase operations during the week, consolidated the seasonal stability of the capital situation and provided some bottom support for the bond market. However, there seems to be an emerging pressure on the bank's liability side, with a slight increase in certificate of deposit (CD) prices. Next week, capital disturbances will increase, but thanks to the central bank's active support, the capital situation still has some support, and the pressure is expected to be relatively controllable [10]. 2. This Week's Focus: Spread Trading and Coupon Defense - **Rapid Deduction of Structural Market**: Since mid - October, the market has been trading on the expectation of the 30 - year Treasury bond swap, driving the ultra - long end down rapidly. The spread between "25 Special 6" and "25 Special 2" has quickly compressed from the high of 16BP on October 14th to around 11BP currently, approaching the central level. The CDB - Treasury bond spread has also entered a downward channel. As the market's pre - pricing of the new regulations on fund sales fees may have come to a temporary end, the probability of a significant impact in the short - term is limited, and the trading sentiment of funds has gradually recovered [15][19]. - **Divergent Performance of Credit Interest Rates in the Adjustment Market**: This week, interest - rate bonds fluctuated weakly, but credit - related varieties performed relatively well, especially the long - end credit. The support may come from two aspects: first, after the adjustment in September, the yields and spreads of credit varieties have reached relatively high levels this year. In October, although the bond market sentiment has improved, the market is still cautious in direction - selection and may allocate coupon assets for defense; second, after the quarter - end, as funds flow back to wealth management and the sentiment of funds recovers, the buying power has gradually returned, and the buying power of other products is also strong [21]. 3. Next Week's Attention: Spread Trading May Be Approaching the End - **End of the Market's Pre - emptive Bond - swapping Trading**: There is a lack of clear direction for the subsequent bond market, and the momentum for the continuous strengthening of ultra - long - end interest rates is relatively limited. The current spread between "25 Special 6" and "25 Special 2" is around 11BP, close to the central level and basically equal to the theoretical VAT tax burden of proprietary institutions. The trading activity of "25 Special 6" has also peaked and declined, indicating that the spread trading may be gradually receding [25][27]. - **Further Compression Space of "CDB - Treasury Bond" Spread**: Although the market has priced in the impact of the new regulations on fund sales fees, the impact may continue before the regulations are implemented, meaning that policy - financial bonds may still face some selling pressure. The buying power of rural commercial banks may support the sustainability of the spread repair, which needs further confirmation [31]. - **Attention to Short - and Medium - Duration Coupon - Value Varieties**: In the fourth quarter, the "deposit transfer" combined with the return of funds after the quarter - end gives some "resilience" to the wealth - management scale. The buying power may form a certain support, and one can pay attention to short - and medium - duration varieties with coupon value [33].

Core Viewpoint - Political uncertainty in Japan is becoming a focal point for the market, with implications for the yen's performance and potential shifts in the stock market and bond yields [3][6]. Group 1: Political Landscape - The Democratic Party has stated it will not join the ruling coalition with the Liberal Democratic Party (LDP) and Komeito, leading to expectations that the ruling coalition may dissolve [3][6]. - If the LDP governs alone, it may face a weakened legislative position, increasing political uncertainty [6][11]. Group 2: Currency and Market Implications - Nomura Securities indicates that the outcome of the ruling coalition will significantly impact the yen, with a potential reversal of "high city trading" if the LDP governs alone, leading to a stock market decline and further yen depreciation [3][11]. - Citigroup forecasts that the USD/JPY exchange rate may rise to the 154-155 range in the short term, while maintaining a long-term view of a large triangular top formation since last summer [3][12]. Group 3: Economic Policy Insights - Citigroup emphasizes that the new economic policy under Prime Minister Kishi is unlikely to replicate Abenomics due to changes in the internal political landscape and the current economic environment [10]. - The market may find support for the yen if the LDP and Komeito alliance is maintained or if a less dovish finance minister is appointed, alleviating concerns over Japanese government bond supply and demand [11].

Core Viewpoint - The resurgence of carry trades among emerging market investors is driven by expectations of an interest rate cut by the Federal Reserve next month, leading to a weaker dollar and increased interest in high-yield currencies [1] Group 1: Market Dynamics - Asset management firms such as Neuberger Berman and Aberdeen Group are increasing their positions in currencies from countries like Brazil, South Africa, and Egypt [1] - The weakening dollar and reduced volatility have created a favorable environment for carry trade strategies [1] - Earlier this year, these trades recorded double-digit returns, but a rebound in the dollar in July caused a temporary halt [1] Group 2: Economic Indicators - Recent poor U.S. employment data has strengthened market expectations that policymakers will have to cut rates next month to avoid an economic recession, reviving interest in arbitrage trading [1] - Institutions like DoubleLine and UBS have recently joined the bearish dollar camp, indicating a renewed narrative of dollar weakness [1] Group 3: Investment Preferences - Neuberger Berman's co-head of emerging market debt, Urquieta, expressed a limited likelihood of a significant dollar rebound, while noting that global economic growth remains relatively stable [1] - Urquieta favors carry trades in South Africa, Turkey, Brazil, Colombia, Indonesia, and South Korea [1]

Core Viewpoint - After the reduction of tariffs, the average effective tariff in the U.S. has decreased from over 20% to 12%, leading to a decrease in inflation and stagflation risks. Consequently, Bank of America (BofA) maintains its interest rate forecasts for 2025 unchanged [1] Interest Rate Predictions - BofA forecasts the 2-year Treasury yield at 3.75%, the 10-year yield at 4.5%, and the 30-year yield at 4.9% by the end of 2025 [1] Interest Rate Curve Strategy - The strategy is adjusted to recommend a "flattening" trade between December 2025 and December 2026, with a target shift from -34 basis points to -70 basis points. This is based on the reduced likelihood of rate cuts in 2025, expected further decline in inflation in 2026, and potential divergence in strategies under new Federal Reserve leadership [2] Duration Positioning - BofA maintains a slightly positive bias towards mid-duration (5-year) bonds, suggesting gradual accumulation of longer-duration positions as the market has previously overestimated recession risks and underestimated hard data support. The 10-year Treasury yield is expected to stabilize in the range of 4.5% to 4.75% [3] Spread Outlook - The short-term outlook for spreads is neutral, while the long-term view is bearish on the 30-year spread due to fiscal deficits and supply pressures in U.S. Treasuries. The short-end (2-5 year) spreads remain neutral to slightly positive due to stable short-term financing conditions [4] Inflation Trading Strategy - The strategy is neutral on inflation trades, closing short positions on 1-year inflation while retaining long positions on 2-year and 3-year inflation, anticipating mid-term inflation to have upward potential, particularly relative to the Eurozone [5] Volatility Strategy - The volatility strategy leans towards short-term bullish and long-term conditional steepening, recommending a 6-month "costless" 2s10s lower bound volatility trade and a long-term "bear steepening" combination based on the 5s30s rate differential to address market repricing risks [5]