Summary of Morgan Stanley Global Macro Forum Call Industry Overview - **Focus**: Global macroeconomic trends, particularly in the US economy and interest rates - **Key Participants**: Vishwanath Tirupattur, Michael Gapen, Seth Carpenter, Matthew Hornbach, Martin Tobias, James Lord Key Points Economic Indicators - **2Q GDP Performance**: Domestic demand has softened significantly, slowing to a 1.2% pace from 2.7% in the previous year [5] - **Labor Market Trends**: There is a sharp drop-off in labor demand, with downward revisions to May and June employment figures totaling 258,000 [40][7] - **Recession Signals**: A deceleration in nonfarm payrolls is more closely correlated with recession risk than revisions to prior data [11] Central Bank Policies - **Federal Reserve Outlook**: The expectation is that the Fed will maintain its current policy stance, with no rate cuts projected until March 2026 despite rising inflation [40] - **Global Central Banks**: The Fed and the Bank of Japan are expected to remain on hold, while the European Central Bank and the Bank of England may ease policies this year [40] Interest Rates and Market Dynamics - **Market-Implied Rates**: The market is pricing the Fed's policy trough rate to move well below 3.00% [15][40] - **Term Premiums**: Concerns regarding the quality of US economic data and a dovish bias from the FOMC are expected to keep term premiums elevated [40] - **USD Outlook**: Continued weakness in the USD is anticipated, with expectations that the bear market for the currency is not over [40] Treasury Issuance - **Composition of Treasury Issuance**: Bills have been crucial in financing Treasury's borrowing needs, and this trend is expected to continue, leading to a lower weighted average maturity (WAM) of marketable debt [28][31][40] Investment Strategies - **Recommended Positions**: - Long UST 5-year notes and FVU5 futures - Short 10-year TIPS breakevens - Long January 2026 fed funds futures - Stay short USD [40][41] Additional Insights - **Tariff Impact**: Evidence of tariff pass-through is becoming clearer, with prices of goods exposed to tariffs showing sharper increases [40] - **Inflation Concerns**: Inflation remains a significant concern for the Fed, with expectations of price pressures in heavily tariffed goods [40] Conclusion The call highlighted a cooling US economy with significant implications for labor demand and central bank policies. The anticipated trajectory of interest rates and the ongoing weakness of the USD present both risks and opportunities for investors. The focus on Treasury issuance and the impact of tariffs on inflation further complicate the macroeconomic landscape.

Summary of Key Points Core Viewpoint - The Ministry of Finance reported that in the first half of the year, national general public budget revenue decreased by 0.3% year-on-year, while expenditure increased by 3.4%, indicating a focus on supporting key areas such as social security, science and technology, education, and health care. Revenue and Expenditure - National general public budget revenue reached 1.15566 trillion yuan, a decrease of 0.3% year-on-year, with the decline narrowing by 0.8 percentage points compared to the first quarter [1] - National general public budget expenditure was 1.41271 trillion yuan, an increase of 3.4% year-on-year, with significant growth in social security and employment (9.2%), science and technology (9.1%), education (5.9%), and health care (4.3%) [1][6] Tax Revenue Trends - National tax revenue amounted to 929 billion yuan, down 1.2% year-on-year, but showed a positive trend with three consecutive months of growth since April [2] - Major tax categories saw stable growth: domestic value-added tax (2.8%), domestic consumption tax (1.7%), and individual income tax (8%) [2] Export Support - Export tax rebates totaled 127 billion yuan, an increase of 13.22 billion yuan compared to the same period last year, supporting foreign trade exports [3] Sector Performance - The equipment manufacturing and modern service industries showed strong tax revenue performance, with specific sectors like railway, shipbuilding, and aerospace equipment seeing tax revenue growth of 32.2%, 9.2%, and 6.3% respectively [3] - The scientific research and technical service industry experienced a tax revenue increase of 13.8%, while the cultural, sports, and entertainment sectors grew by 8.6% [4] Non-Tax Revenue - Non-tax revenue reached 227 billion yuan, growing by 3.7% year-on-year, although the growth rate declined compared to the first quarter [5] - Revenue from state-owned resource usage increased by 4.8%, driven by local governments optimizing asset utilization [5] Local Government Revenue - Local general public budget revenue grew by 1.6%, with 27 out of 31 provinces reporting increases [5] Fiscal Policy Outlook - The Ministry of Finance plans to continue implementing a more proactive fiscal policy, accelerating budget execution and improving fund utilization efficiency to promote economic recovery [8] - The government aims to support consumption through initiatives like trade-in programs and enhance the consumption environment in key cities [8] Special Bonds and Debt Issuance - The issuance of special bonds has accelerated, with a 45% year-on-year increase, and the scope of projects eligible for funding has expanded [9] - The Ministry of Finance plans to issue 46 general bonds and 11 super long-term special bonds in the third quarter, maintaining stability in the bond market [9]

Core Points - The "Big and Beautiful" bill is viewed by Trump as a significant legislative achievement, likening it to a declaration of independence from national decline, despite facing multiple risks and skepticism from authoritative institutions like the CBO [1][4] Tax Cuts and Fiscal Deficit Reduction - The core provision of the "Big and Beautiful" bill is the reduction of the corporate tax rate from 35% to 21%, along with one-time tax deductions for qualifying production assets [3] - The bill also increases tax deductions for individual taxpayers, raising the standard deduction for single filers from $14,600 to $16,000 and for married couples from $29,200 to $32,000 [3] - The bill plans to cut at least $1.5 trillion in federal spending over the next decade, primarily targeting social welfare programs, to offset the increased fiscal deficit from tax cuts [4] Economic Impact and Uncertainties - The bill is expected to stimulate economic growth, potentially increasing the actual GDP growth rate by 3 percentage points and creating over 7 million jobs [6] - However, the long-term economic stimulus effects of the tax cuts may be limited, as many tax benefits have expiration dates, and the benefits primarily favor high-income groups [6][7] - The bill's optimistic assumptions may overlook negative effects, such as potential inflation from increased import tariffs and reduced consumer spending due to cuts in social welfare [7] Fiscal Deficit and Debt Concerns - The White House believes that tax cuts and deregulation will stimulate economic growth, thereby expanding the tax base, but these predictions carry significant uncertainty [8] - The bill is projected to increase the national debt by at least $3.4 trillion over the next decade, with net interest payments on the federal debt expected to exceed $1 trillion by 2025 [9] - The U.S. government is caught in a cycle of expanding deficits and increasing debt issuance, which could undermine market confidence in U.S. debt repayment capabilities [9]

Group 1 - The Ministry of Finance reported that in the first half of the year, the issuance of national bonds reached a record high of 7.88 trillion yuan, an increase of 20,547 million yuan or 35.28% year-on-year, with an average issuance interest rate of 1.52%, down 43 basis points [1] - The average bidding multiple for book-entry national bonds was 3.03 times, indicating strong investor interest [1] - Special bonds for state-owned banks' core tier one capital were issued successfully, totaling 500 billion yuan, completed in four phases from late April to early June [1] Group 2 - The Ministry of Finance plans to complete the issuance of 1.3 trillion yuan in ultra-long-term special bonds to support key projects [3] - The issuance of new local government special bonds reached 2.16 trillion yuan in the first half of the year, a 45% increase year-on-year, playing a positive role in infrastructure and public welfare [3] - The management of special bond usage has shifted from a "positive list" to a "negative list," allowing more projects to apply for funding, excluding only non-revenue projects and certain restricted areas [5] Group 3 - The scope for using special bonds as project capital has expanded from 17 to 22 industries, with 191.7 billion yuan issued for this purpose in the first half of the year, a 16% increase [7] - Policies now allow special bonds to be used for land reserves and to support local governments in acquiring existing residential properties for affordable housing, promoting a stable real estate market [7]

Revenue and Expenditure Trends - In the first half of 2025, total revenue growth for the fiscal accounts was -0.6%, an improvement from -1.3% previously, while total expenditure growth increased to 8.9% from 6.6%[2] - The revenue-expenditure gap reached a new high for 2023, indicating a proactive fiscal approach in the first half of the year[2] Structural Improvements in Revenue - General public budget revenue decreased by 0.3% year-on-year, with the decline narrowing by 0.8 percentage points compared to Q1[5] - Tax revenue showed signs of recovery, with a cumulative growth rate of -1.2%, improving from -1.6%[5] - Non-tax revenue growth fell to 3.7%, significantly below the five-year average of 10.8%[5] Land Revenue Recovery - Government fund revenue saw a cumulative growth rate of -2.4%, an improvement from -6.9% in the previous period, primarily driven by a rebound in land sales in June[19] - Local land revenue growth narrowed to -6.5%, compared to -11.9% previously, influenced by increased supply of quality land in core cities[19] Special Bonds and Expenditure Support - The issuance of special bonds accelerated, with a cumulative expenditure growth rate of 30% for the second fiscal account, up from 16% previously[23] - A total of 2.16 trillion yuan in new local government special bonds were issued in the first half of 2025, marking a 45% increase year-on-year[23]

21世纪经济报道记者周潇枭 北京报道7月25日，财政部召开2025年上半年财政收支情况新闻发布会。 上半年，全国一般公共预算收入约11.56万亿元，同比下降0.3%，降幅较一季度收窄0.8个百分点。其 中，全国税收收入9.29万亿元，下降1.2%；非税收入2.27万亿元，增长3.7%。分中央和地方看，上半年 中央一般公共预算收入4.86万亿元，下降2.8%；地方一般公共预算本级收入6.7万亿元，增长1.6%。 上半年，全国一般公共预算支出14.13万亿元，同比增长3.4%。分中央和地方看，中央一般公共预算本 级支出1.99万亿元，增长9%；地方一般公共预算支出12.14万亿元，增长2.6%。 （财政部2025年上半年财政收支情况发布会现场图，21记者现场拍摄） 从主要税种收入状况来看，上半年国内增值税3.64万亿元，增长2.8%；企业所得税2.49万亿元，下降 1.9%；国内消费税8980亿元，增长1.7%；进口货物增值税、消费税8729亿元，下降6.1%；个人所得税 7945亿元，增长8%。另外，上半年出口退税1.27万亿元，增长11.6%。 今年上半年我国GDP增长5.3%，受物价低迷、出口退税增长较快等 ...

Core Insights - The recent loss of the ruling coalition in Japan's upper house elections shifts market focus towards fiscal policy and political developments [1] - Economists highlight the importance of whether future fiscal expansion plans will require funding beyond surplus tax revenues and other sources, potentially leading to new government bond issuance [1] - The Japanese Ministry of Finance has recently adjusted its government bond issuance plan, making immediate alternatives like bond repurchases difficult [1] - The future trajectory of long-term government bond yields may influence the preparation of supplementary budgets, ultimately constraining large-scale spending plans [1]

Group 1 - The Chinese Ministry of Finance will issue 60 billion RMB in government bonds in Macau on July 16, marking the fourth consecutive year of such issuances in the region [1] - This issuance is the first RMB bond in Macau since the bond market infrastructure between Hong Kong and Macau was connected, indicating a significant step in regional financial integration [1] - The scale of the bond issuance is a historical high, and the optimized maturity structure is expected to enhance the regular issuance mechanism, supporting the development of Macau's bond market and its economic diversification [1] Group 2 - The third China International Supply Chain Promotion Expo will open in Beijing on July 16, featuring 1,200 exhibitors, including 651 domestic and foreign enterprises [2] - The expo will cover six major supply chain sectors: advanced manufacturing, green agriculture, digital technology, healthy living, smart vehicles, and clean energy [2] Group 3 - The 2025 World Humanoid Robot Games will commence on August 14 in Beijing, with an energy transmission event starting on July 15 at the Badaling Great Wall [4][6] - Eight humanoid robot athletes will participate in the energy transmission activity, showcasing technological innovation and interaction with the public [6][7] - The event will culminate at the National Speed Skating Hall, where all energy cubes will form the "Smart Core," symbolizing collaboration and technological advancement [9][11] Group 4 - The 11th batch of national organized drug centralized procurement has been initiated, including 55 drug varieties, while new drugs will not be included to protect industry innovation [12] - Since 2018, the national level has conducted 10 batches of drug procurement, covering a total of 435 drug varieties [12] Group 5 - The new regulations for individual business registration have been officially implemented, allowing individual businesses to transition to enterprises while retaining their social credit codes and other identifiers, thus reducing the cost of transformation [13] Group 6 - The Barkun Airport in Xinjiang officially commenced operations on July 15, with an annual passenger throughput design capacity of 300,000 and a cargo throughput of 700 tons, enhancing the regional air transport network [14] Group 7 - The flow of the Yellow River at the Lijin hydrological station has receded to 725 cubic meters per second, marking the completion of the 2025 Yellow River water and sediment regulation project, achieving multiple objectives including drought relief and ecological replenishment [15]

Core Insights - The Ministry of Finance has announced the issuance of 11 ultra-long-term special government bonds in the third quarter, with specific issuance dates in July, August, and September [1] Group 1: Issuance Schedule - In July, there will be 3 issues, including the first issuance of a 20-year ultra-long-term special government bond on July 14, which is 10 days earlier than originally planned [1] - In August, there will be 4 issues, including a 50-year bond on August 1, and a 30-year bond on August 8, both of which are part of the revised schedule [1] - In September, there will also be 4 issues, including a 50-year bond on September 10, which is 14 days earlier than the original plan [1] Group 2: Comparison with Previous Issuance - The first issuance of ultra-long-term special government bonds this year occurred on April 24, which was significantly earlier than the previous year's first issuance on May 17 [1] - The adjustments in the issuance schedule indicate a proactive approach by the Ministry of Finance to manage government debt [1]

Core Viewpoint - The Ministry of Finance announced the issuance of 57 government bonds in the third quarter of 2025, including 18 key term bonds, 22 short-term discount bonds, 6 savings bonds, and 11 ultra-long-term bonds [1][8]. Group 1: Key Term Bonds - In July, 4 bonds will be renewed and 2 will be newly issued, while 6 bonds will be issued in both August and September, with 2 being new issues each month [1][2]. - The key term bonds include various maturities, with the first issuance scheduled for July 4 and subsequent issuances on July 11, July 24, August 1, August 6, August 8, August 14, August 20, August 22, September 5, September 10, September 12, September 19, and September 26 [2]. Group 2: Short-term Discount Bonds - A total of 7 short-term discount bonds will be issued in July, including 1 each for 28 days and 63 days, 3 for 91 days, and 2 for 182 days [4][5]. - In August, another 7 short-term bonds will be issued, and 8 will be issued in September, with similar maturity structures [4][5]. Group 3: Savings Bonds - In July, 3-year and 5-year electronic savings bonds will be issued, while in August, 3-year and 5-year certificate savings bonds will be issued [6]. - In September, the issuance will return to 3-year and 5-year electronic savings bonds [6]. Group 4: Ultra-long-term Bonds - A total of 11 ultra-long-term bonds will be issued, with new issues for 20-year and 30-year bonds in July, and renewals for 30-year bonds [7]. - In August, there will be renewals for 50-year, 30-year, and 20-year bonds, along with a new 20-year bond [7].