Core Viewpoint - The article discusses the relationship between nominal interest rates, inflation, and government bond prices, emphasizing that nominal interest rates serve as a proxy for risk-free rates and are influenced by economic growth and inflation expectations [1][2]. Group 1: Impact of Inflation and Interest Rates - CPI is a crucial indicator of inflation; an increase in CPI from 2 to 5 leads to higher nominal return expectations, resulting in rising risk-free rates and falling government bond prices [2]. - Actual interest rates (nominal rates minus inflation) are positively correlated with economic growth, while nominal rates are positively correlated with both economic growth and inflation [2]. Group 2: Mechanism of Bond Price Changes - When nominal interest rates decrease, government bond prices increase as investors seek higher yields from fixed-income products [3]. - Conversely, when nominal interest rates rise, government bond prices decline due to new bonds offering higher yields [4]. Group 3: Key Factors Influencing 30-Year Bonds - The two main factors affecting 30-year government bonds are actual interest rates and CPI growth rates; both factors inversely affect bond prices [5][6]. - A simultaneous decrease in actual interest rates and CPI growth rates leads to a significant increase in bond prices, while simultaneous increases lead to a substantial decrease [7]. Group 4: Determinants of Actual Interest Rates - Economic conditions significantly influence actual interest rates, reflecting borrowing costs and market supply-demand dynamics [8]. - Central bank policies, including adjustments to open market operations and reserve requirements, play a critical role in shaping actual interest rates [9]. Group 5: Factors Affecting 30-Year Bond ETF - Changes in interest rates directly impact ETF net values; rising yields lead to declining net values, while falling yields boost net values [10]. - The shape of the yield curve affects the attractiveness of 30-year bonds; a steepening curve may reduce demand for long-term bonds, while a flattening or inverted curve enhances their appeal [11][12]. - Inflation expectations can suppress ETF prices, while recession expectations can lower rates and benefit ETF prices [13][14]. Group 6: Conclusion and Investment Strategy - The 30-year government bond ETF acts as a "barometer" for interest rate markets, influenced by macroeconomic conditions, policy expectations, and investor behavior [15]. - Investors should focus on interest rate path expectations, ETF premium/discount risks, and inflation expectations when making investment decisions [16][17][18]. - In a rate-cutting environment, it is generally advisable to take long positions in government bonds, although inappropriate rate cuts could lead to rising CPI and hinder market rate declines [19][20].