Group 1 - The bond market has shown significant differentiation since mid-November, with the yield spread between 30-year and 10-year government bonds widening to over 40 basis points due to lower-than-expected central bank bond purchases and strong profit-taking by institutions [1] - After a continuous decline, long-term bonds began to recover in late December, driven by expectations of loose monetary policy and various market influences, including potential reductions in long-term bond issuance [1][3] - The low interest rate environment is expected to persist into 2026, with increasing influence from asset pricing and institutional behavior on the bond market, while traditional allocation strategies face pressure from interest rate risk assessments [3][4] Group 2 - Fiscal policy is anticipated to remain proactive, while monetary policy will focus on coordination, with expectations for a deficit level around 4% and a corresponding scale of 5.9 trillion yuan [3] - The supply of bonds is projected to increase in 2026, but the marginal growth rate is expected to slow down, with a likelihood of one rate cut of 10 basis points and one reserve requirement ratio reduction [3][5] - The yield curve is expected to steepen further, with the 30-year and 10-year bond yield spread likely to remain elevated, and the market is facing uncertainties regarding central bank bond purchases and public fund redemption rates [5]

Core Viewpoint - Concerns over a new large-scale economic stimulus plan in Japan are causing turmoil in the bond market, leading to a surge in long-term government bond yields and downward pressure on the yen, impacting the stock and currency markets simultaneously [1][2][5]. Group 1: Bond Market Reaction - The price of Japanese long-term government bonds has plummeted, with the 40-year bond yield rising by 8 basis points to 3.68%, the highest since its issuance in 2007 [1]. - The 20-year and 30-year bond yields have also increased by at least 4 basis points, with the 30-year yield nearing historical highs [1]. Group 2: Yen Exchange Rate - The yen has weakened significantly, with the exchange rate against the US dollar falling below the critical psychological level of 155 and reaching a historical low of 180 against the euro [2]. Group 3: Economic Stimulus Plan Speculation - Market speculation centers on the anticipated scale of the economic stimulus plan, which is expected to exceed last year's 13.9 trillion yen (approximately 89.8 billion USD) [7][8]. - Finance Minister Satsuki Katayama indicated that the plan has "expanded significantly" so far, heightening investor anxiety over potential new debt issuance [8]. Group 4: Internal Political Pressure - Pressure from within the ruling Liberal Democratic Party may lead to more aggressive fiscal measures, with a proposal for a supplementary budget of approximately 25 trillion yen (about 161 billion USD) being submitted [10]. - This figure significantly exceeds previous media reports of a supplementary budget around 14 trillion yen and a total plan scale of 17 trillion yen [10]. Group 5: Market Sentiment and Upcoming Auctions - Market sentiment is extremely pessimistic ahead of the upcoming 20-year bond auction, with expectations of weak demand for the 800 billion yen (approximately 51.6 million USD) bonds [11]. - Analysts predict that if demand is weak, yields may rise further, reflecting concerns over the expanding stimulus plan and delayed interest rate hikes by the central bank [11][14]. Group 6: Yield Curve Dynamics - The steepening of the yield curve indicates that long-term yields are rising faster than short-term yields, reflecting market expectations of increased long-term risk premiums due to government borrowing [14]. - The 10-year benchmark bond yield rose by 1.5 basis points to 1.745%, reaching its highest level since June 2008 [11][14].

Core Viewpoint - The bond market has adjusted with a steepening yield curve, and the correlation between stock and bond markets has weakened as of September. The overall bond market has returned to a fluctuating range without significant changes in the funding and economic fundamentals [1]. Group 1: Bond Market Dynamics - As of the latest data, the yields for 2-year, 5-year, 10-year, and 30-year government bonds are 1.41%, 1.62%, 1.85%, and 2.15%, reflecting changes of 0.23, -0.93, 1.35, and 1.00 basis points respectively since the end of August [1]. - The People's Bank of China (PBOC) has maintained a reasonable liquidity level, with a net injection of 3,865 billion yuan in August through various monetary policy tools [3]. - The current DR001 and DR007 rates are fluctuating around 1.4% and 1.45%, indicating a stable liquidity environment [3]. Group 2: Economic Recovery - The trade data for August shows a year-on-year export growth rate of 4.4% and an import growth rate of 1.3%, both of which have decreased by 2.8 percentage points compared to the previous month [4]. - The manufacturing PMI for August is reported at 49.40%, a slight increase of 0.1 percentage points, indicating improvements in both supply and demand sides [4]. Group 3: Central Bank Actions - There is a growing expectation for the PBOC to restart government bond trading, influenced by policy signals and changes in liquidity operations [6]. - The PBOC has been utilizing various tools for medium to long-term funding, with the balance of reverse repos increasing significantly since the end of 2024 [6]. - The necessity to restart government bond trading has increased due to the declining balance of government bonds held by the PBOC [6]. Group 4: Market Outlook - With the PBOC's active liquidity support and reduced impact from government bond issuance, significant fluctuations in the funding environment are unlikely in September, and short-term bond trends are expected to remain stable [7]. - The long-term bullish logic for the stock market remains unchanged, which continues to exert downward pressure on long-term bonds [7].

Group 1 - The Bank of Japan has raised its inflation forecast, indicating a higher likelihood of interest rate hikes, which has led to a slight appreciation of the yen [1] - Goldman Sachs estimates that increased tariffs will raise the average effective tariff rate in the U.S. by approximately 14 percentage points by 2025, with a further increase of 3 percentage points to around 20% in the following year, putting pressure on U.S. economic growth [2] - The U.S. GDP growth for the fourth quarter is projected to be only about 1%, with a recession risk estimated at 30% due to the impact of tariffs [2] Group 2 - The French Foreign Trade Bank anticipates a steepening trend in the U.S. Treasury yield curve in the medium term, driven by expectations that the Federal Reserve will begin cutting rates in October [2] - The Federal Reserve's decision to maintain interest rates in July has raised the threshold for a rate cut in September, with some committee members still supporting a 25 basis point cut, indicating internal divisions within the FOMC [3] - Julius Baer economists predict that U.S. economic growth will slow due to weak private consumption and cautious investment in real estate and equipment [3] Group 3 - Barclays suggests that growth in artificial intelligence investments and increased household wealth may continue to support the U.S. economy, particularly consumer spending among affluent groups [4] - Renaissance Macro Research analysts warn that low unemployment rates may create a false sense of security in the labor market, masking a gradual deterioration [4]