Group 1: Report Investment Rating - No investment rating for the industry is provided in the report [1] Group 2: Core Views - The central bank's decision on February 27, 2026, to lower the foreign exchange risk reserve ratio for forward foreign exchange sales from 20% to 0 is a counter - cyclical adjustment in the context of the RMB's phased strengthening, aiming to ease the amplifying effect of unilateral appreciation expectations on foreign exchange supply and demand [1][9] - There is a large amount of foreign exchange position precipitation in the banking system, and activating these positions and broadening the uses of foreign exchange funds is necessary to improve the efficiency of capital use in the banking system [2][23] - The historical practice of allowing banks to pay RMB deposit reserves with foreign exchange in 2007 achieved structural optimization of the source of reserve - paying assets. In the current context, restarting the "foreign exchange reserve payment" mechanism may have effects similar to a "reserve ratio cut", bring liquidity easing to large banks, and indirectly adjust the supply and demand in the foreign exchange market [3][27][28] Group 3: Summary by Directory 1. Central Bank Lowers Foreign Exchange Reserve Ratio to Counter RMB's Strong Rise - On March 2, 2026, the central bank lowered the foreign exchange risk reserve ratio for forward foreign exchange sales from 20% to 0, aiming to lower the cost of forward foreign exchange purchases, improve the efficiency of enterprises' hedging, and ease unilateral appreciation expectations [9] - The RMB's strengthening is related to the high record of recent foreign exchange settlement and sales data. From November to December 2025, the net foreign exchange settlement in RMB increased significantly, and in January 2026, it remained at a high level. The increase in foreign exchange reserves was significantly smaller than the impact of bank foreign exchange settlement and sales, indicating that the central bank did not conduct large - scale foreign exchange settlement and sales operations with commercial banks [11][12] 2. Evolution of the Central Bank's Foreign Exchange Policy and the Bank's Foreign Currency Position Management Model 2.1 Central Bank's Foreign Exchange Policy Changes and Management Tools - After the "811 Exchange Rate Reform", the foreign exchange regulation framework shifted from direct central bank intervention to indirect regulation and risk management using tools. The central bank uses various tools such as adjusting the forward foreign exchange sales risk reserve ratio and the foreign exchange deposit reserve ratio to guide market entities to manage exchange rate risks [14] - The main foreign exchange regulation tools include the forward foreign exchange sales risk reserve ratio, the financial institution foreign exchange deposit reserve ratio, and the cross - border financing macro - prudential adjustment parameter, each with different functions and current levels [15] 2.2 T - Account Perspective on Banks' Handling of Foreign Exchange Positions in Foreign Exchange Settlement and Sales Business - The difference in foreign exchange settlement and sales creates foreign exchange exposure. Banks need to consider spot flattening, forward foreign exchange, swap operations, or option processing based on the term structure and RMB capital gap. The T - account is used to understand the impact of these operations on liquidity [16] - Different foreign exchange business operations have different T - account entries. For example, spot agency foreign exchange settlement involves debiting foreign currency funds and crediting RMB funds, while forward foreign exchange settlement and sales first confirm derivative financial instruments at the signing date [16] - Currently, due to the complex external situation and large net foreign exchange settlement, a significant amount of foreign exchange funds remain in the banking system, limiting the efficiency of banks' use of domestic and foreign currency funds [19] - Banks have various uses for foreign currency funds, including paying foreign currency deposit reserves, allocating to highly liquid assets, investing in foreign currency loans and bonds, and engaging in inter - bank foreign currency lending. However, the current situation shows that there is a need to activate foreign exchange positions [22][23] 3. Feasibility Study of Using Foreign Exchange Positions for Reserve Payment during the Peak of Foreign Exchange Settlement and Sales - Currently, there is a large amount of foreign exchange position precipitation in banks, while RMB liquidity is relatively tight. The weighted legal deposit reserve ratio is close to the 5% lower limit, making it difficult to lower [26] - In 2007, the central bank required some large - scale banks to pay the newly increased RMB legal deposit reserves with foreign exchange funds, which optimized the source of reserve - paying assets and maintained the stability of the RMB asset market [27] - In the current context, restarting the "foreign exchange reserve payment" mechanism may have effects similar to a "reserve ratio cut", bring liquidity easing to large banks, and indirectly adjust the supply and demand in the foreign exchange market [28]

Group 1: RMB's "Atypical" Appreciation - The recent "atypical" appreciation of the RMB corresponds to a "stagflation-like" environment in the U.S., with the core contradiction shifting from "stagnation" to "inflation" [1] - The RMB's appreciation has gone through three phases: damage to USD credit (anchoring to USD, April-June) → strengthening of easing expectations (anchoring to U.S. Treasuries, July-September) → extreme "K-shaped differentiation" (decoupling period, October to present) [3] - The U.S. "K-shaped differentiation" indicates a decline in the explanatory power of the U.S.-China interest rate differential on the RMB exchange rate [3] Group 2: Exchange Rate Management - The People's Bank of China (PBOC) announced a reduction in the foreign exchange risk reserve ratio for forward sales from 20% to 0%, prompting discussions about a "brake" on RMB appreciation [5] - Historically, reductions in the foreign exchange risk reserve ratio have led to significant declines in "swap premiums," which reduce the cost of hedging for enterprises [6] - The recent reduction in the foreign exchange risk reserve ratio is more about signaling than actual intervention, as the "swap premium" had already stabilized around zero prior to the announcement [6] Group 3: Central Bank's Neutral Stance - The shift from a "brake" phase to a recent "neutral" management approach by the PBOC reflects a change in focus towards domestic expectations [7] - During the "brake" phase, domestic expectations were overly optimistic, as indicated by the "Shanghai gold premium" reaching -1200 pips [7] - The PBOC's role in stabilizing domestic capital market liquidity has been significant and often underestimated by the market [7]

Report Summary 1) Report Industry Investment Rating No investment rating information is provided in the report. 2) Core Viewpoint The conflict between the US and Iran has escalated, and the closure of the Strait of Hormuz has triggered a global energy crisis. Considering Iran's influence on methanol exports and the Strait of Hormuz's impact on shipping, the impact on methanol is significant. Methanol hit the daily limit, breaking through the 60 - day moving average on the weekly K - line, opening up upward space. In the short term, as the event continues to unfold, methanol is in a pattern where it is easier to rise than to fall. A low - buying strategy is recommended, and close attention should be paid to the external situation [4]. 3) Summary by Relevant Catalogs Fundamental Analysis - As of February 25, 2026, the total inventory of methanol ports in China was 144.67 million tons, an increase of 1.45 million tons compared with the previous data. The inventory in East China decreased slightly by 0.05 million tons, while that in South China increased by 1.50 million tons. The methanol port inventory accumulated slightly after the holiday. Although the unloading speed of foreign ships was average, the holiday restricted提货, affecting consumption. In Jiangsu, some warehouses along the Yangtze River had ship - supported pick - ups, but truck pick - ups were scarce, and inventory accumulated under foreign ship supply. In Zhejiang, downstream performance was stable, and less ship unloading led to inventory decline. In South China this week, the port inventory increased slightly. In Guangdong, both imported and domestic ship cargoes arrived during the period, and the pick - up volume in the mainstream warehouses decreased significantly due to the holiday, resulting in inventory accumulation. In Fujian, there was no ship cargo replenishment, and the consumption speed slowed down due to the decrease in downstream start - up, with pick - up performance being average and inventory decreasing slightly [1]. Macroeconomic Analysis - On February 27, the Political Bureau of the CPC Central Committee held a meeting, emphasizing the need to continue implementing a more proactive fiscal policy and a moderately loose monetary policy, and strengthening the coordination of reform measures and macro - policies. - The People's Bank of China decided to reduce the foreign exchange risk reserve ratio for forward foreign exchange sales business from 20% to 0 starting from March 2, 2026. - On March 1 local time, Iran's Supreme Leader Ayatollah Khamenei was assassinated. - Shipping industry news showed that three oil tankers were attacked and damaged in the waters along the Persian Gulf. On the other hand, shipping data showed that more than 200 vessels, including oil and liquefied gas tankers, were anchored in the Strait of Hormuz and nearby waters [2]. Futures and Spot Market Analysis The conflict between the US and Iran has broken out, with a scale and degree far exceeding previous ones. The closure of the Strait of Hormuz has triggered a global energy crisis, which has a huge impact on methanol. Methanol hit the daily limit, breaking through the resistance of the 60 - day moving average on the weekly K - line, opening up upward space. In the short term, as the event continues to ferment, methanol is in a situation where it is easy to rise and difficult to fall, and a low - buying strategy should be adopted, with a focus on tracking the external situation [4].

1. Report Industry Investment Rating No information provided. 2. Core Viewpoints - Last week, the bond market was strong, and the yield curve continued to flatten. The long - term bond yield decreased overall, while the short - term bond yield increased slightly. This week, the bond market is expected to oscillate strongly. The escalation of the US - Iran conflict will boost risk - aversion sentiment, and the loose liquidity at the beginning of the month will support the bond market. However, the two - session policy expectations and profit - taking by some trading desks may cause fluctuations [2]. 3. Summary by Directory 3.1 Last Week's Bond Market Review 3.1.1 Secondary Market - The bond market was generally strong last week, with long - term bond yields continuing to decline. The 10 - year Treasury futures main contract fell 0.17% cumulatively. The 10 - year Treasury yield decreased by 1.46bp compared to the Saturday before the Spring Festival, and the 1 - year Treasury yield increased slightly by 0.23bp, with the term spread continuing to narrow [3]. - On February 24, the LPR remained unchanged, and the bond market was weak. The 10 - year Treasury yield rose 1.24bp, and the 10 - year futures main contract rose 0.02%. - On February 25, affected by the stock market and real - estate policy rumors, the bond market adjusted. The 10 - year Treasury yield rose 1.35bp, and the 10 - year futures main contract fell 0.13%. - On February 26, after the "Shanghai Seven - Point Policy" was implemented, the bond market was under pressure. The 10 - year Treasury yield rose 1.30bp, and the 10 - year futures main contract fell 0.10%. - On February 27, the central bank cut the foreign exchange risk reserve ratio, and the bond market recovered. The 10 - year Treasury yield dropped 4.11bp, and the 10 - year futures main contract rose 0.05%. - On February 28, due to the escalation of the US - Iran situation, the bond market was strong. The 10 - year Treasury yield decreased by 1.24bp [4]. 3.1.2 Primary Market - Last week, 46 interest - rate bonds were issued, 23 less than the week before the Spring Festival. The issuance volume was 787.4 billion yuan, a decrease of 138.3 billion yuan, and the net financing was 368.3 billion yuan, a decrease of 101.1 billion yuan. The issuance and net financing of Treasury bonds increased, while those of policy - financial bonds and local government bonds decreased [18]. - The subscription demand for interest - rate bonds was acceptable. The average subscription multiples for Treasury bonds, policy - financial bonds, and local government bonds were 3.62, 3.41, and 17.86 times respectively [19]. 3.2 Last Week's Important Events - On February 27, the central bank announced to cut the foreign exchange risk reserve ratio for forward foreign exchange sales from 20% to 0% from March 2, 2026. This move will reduce the cost of forward foreign exchange sales for banks and enterprises, encourage enterprises to conduct forward foreign exchange purchases, and release a policy signal to stabilize the exchange - rate market [21]. 3.3 Real - Economy Observation - Last week, high - frequency production data showed mixed trends. The blast - furnace operating rate and daily molten - iron output increased, while the operating rates of petroleum - asphalt plants and semi - steel tire plants decreased. - In terms of demand, the BDI index continued to rise, while the CCFI index continued to decline. The sales area of commercial housing in 30 large and medium - sized cities decreased significantly. - Regarding prices, pork prices dropped significantly, while most commodity prices rose. Copper and rebar prices increased, and oil prices decreased slightly [22]. 3.4 Last Week's Liquidity Observation - Last week, the central bank's open - market operations had a net withdrawal of 461.4 billion yuan. The R007 and DR007 rates increased significantly, the issuance rate of inter - bank certificates of deposit of joint - stock banks continued to decline, the national - share direct - discount rates of all terms increased significantly, and the volume of pledged - repurchase transactions decreased significantly. The inter - bank market leverage ratio first increased and then decreased, with an overall slight decline [33][36][40].

Core Insights - The report highlights the geopolitical tensions affecting oil prices, particularly the military actions involving the U.S. and Iran, which have led to disruptions in shipping through the Strait of Hormuz [4] - OPEC+ has confirmed an increase in oil production by 206,000 barrels per day starting in April, indicating a response to rising global demand [4] - The U.S. Producer Price Index (PPI) for January exceeded expectations, suggesting inflationary pressures in the economy [4] Economic Data Summary - The Baltic Dry Index closed at 2140.00, up by 1.09% [5] - The Nasdaq Index closed at 22668.21, down by 0.92%, while the Dow Jones Industrial Average closed at 48977.92, down by 1.05% [5] - Crude oil prices (ICE Brent) increased by 2.50% to $72.52, reflecting market reactions to geopolitical events [5] - The U.S. dollar index decreased by 0.14% to 97.64, indicating slight weakening against other currencies [5] - The Hang Seng Index closed at 26630.54, up by 0.95%, showing resilience in the Hong Kong market [5] - The Shanghai Composite Index closed at 4162.88, up by 0.39%, while the Shenzhen Composite Index closed at 2763.59, up by 0.30% [5]

Report Industry Investment Rating - The rating for Treasury bond futures is "Bullish" [1] Core View of the Report - The short - term financial market's risk - aversion sentiment has risen due to the US - Israel joint air strike on Iran on February 28, and Treasury bond futures may be bullish in the short term. The report suggests that trading - type investors conduct band operations [2] Summary by Relevant Catalogs Market Review - On Friday, the main contracts of Treasury bond futures opened roughly flat and fluctuated narrowly horizontally throughout the day. As of the close, the 30 - year Treasury bond futures main contract TL2606 fell 0.07%, the 10 - year T2606 rose 0.05%, the 5 - year TF2606 rose 0.04%, and the 2 - year TS2606 rose 0.03% [1] Important Information - **Open Market Operations**: On Friday, the central bank conducted 269 billion yuan of 7 - day reverse repurchase operations with no reverse repurchase maturities, resulting in a net injection of 269 billion yuan. On February 28, the central bank conducted 116 billion yuan of 7 - day reverse repurchase operations with no reverse repurchase maturities, resulting in a net injection of 116 billion yuan [1] - **Funds Market**: On Friday, the overnight interest rate in the inter - bank funds market declined slightly compared to the previous trading day. The weighted average of DR001 throughout the day was 1.35% (1.37% in the previous trading day), and the weighted average of DR007 throughout the day was 1.48% (the same as the previous trading day) [1] - **Cash Bond Market**: On Friday, the closing yields of inter - bank Treasury bonds fluctuated narrowly compared to the previous trading day. The yield to maturity of 2 - year Treasury bonds rose 0.49 basis points to 1.37%, the 5 - year rose 1.31 basis points to 1.56%, the 10 - year rose 1.30 basis points to 1.83%, and the 30 - year rose 4.01 basis points to 2.30% [1] - **Bond Issuance**: As of February 25, the issuance scale of local government bonds nationwide has exceeded 2 trillion yuan. The issuance scale of local government bonds in the first two months of this year (about 2.28 trillion yuan) is expected to increase by about 22% compared to the same period last year. As of February 26, the total issuance scale of Treasury bonds in 2026 reached 2.239 trillion yuan, a 12% increase compared to 1.99606 trillion yuan in the same period in 2025. The newly - issued local government special bonds in 2026 as of February 26 were 807.686 billion yuan, a 60% increase compared to 504.075 billion yuan in the same period in 2025. March may be the peak supply period for Treasury bonds and local bonds in the first quarter [1] - **Policy**: On February 27, the central bank decided to lower the foreign exchange risk reserve ratio for forward foreign exchange sales business from 20% to 0 starting from March 2, 2026, which is the first adjustment since September 2022. This will reduce the cost of forward foreign exchange sales business for banks and lower the cost of forward foreign exchange purchases for enterprises, releasing a policy signal to prevent the rapid appreciation of the RMB and helping to stabilize market expectations [1][2] - **Political Meeting**: On February 27, the Political Bureau of the CPC Central Committee held a meeting to discuss the draft outline of the 15th Five - Year Plan and the government work report. It emphasized continuing to implement a more proactive fiscal policy and a moderately loose monetary policy, strengthening the synergy between reform measures and macro - policies, and promoting the high - quality development of the economy [2] - **International Incident**: On February 28, the US and Israel jointly carried out an air strike on Iran, and Iran's Supreme Leader Khamenei was attacked and killed, casting a shadow of war over the Middle East again [2] Market Logic - In January, China's social financing scale increased by 7.22 trillion yuan, exceeding the market expectation of 6.51 trillion yuan and an increase of 165.4 billion yuan compared to the same period last year. The net financing of government bonds in January increased by 976.4 billion yuan, an increase of 283.1 billion yuan year - on - year. The RMB loans in the credit caliber increased by 4.71 trillion yuan, slightly lower than the market expectation of 4.5 trillion yuan and a decrease of 420 billion yuan year - on - year. In January, the sales price of second - hand residential properties in first - tier cities decreased by 0.5% month - on - month, with the decline narrowing compared to the previous month. China's overall inflation level rebounded moderately in January, with the core CPI rising 0.3% month - on - month and the PPI rising 0.4% month - on - month. The official manufacturing PMI in January was 49.3%, and the service industry business activity index was 49.5%, both below the boom - bust line, indicating a moderately growing economy in January. The Ministry of Finance stated that in 2026, the fiscal deficit, total debt, and total expenditure will remain at a necessary level. The central bank said there is still room for reserve requirement ratio cuts and interest rate cuts this year to keep the comprehensive social financing cost at a low level and maintain sufficient liquidity in the banking system. On Friday, the Wind All - A Index opened lower, quickly recovered in the morning session, and then moved sideways, with a small rally in the afternoon, closing up 0.41% for the day with a trading volume of 2.51 trillion yuan, showing little change compared to the previous trading day's 2.56 trillion yuan [2] Trading Strategy - Trading - type investors are advised to conduct band operations [2]

Report Summary 1. Report Industry Investment Rating No investment rating information provided in the report. 2. Core Viewpoints of the Report - The medium - and long - term upward drivers of precious metals remain unchanged, and the precious metals sector has shown signs of recovery from the sharp decline at the end of January. It is recommended that investors maintain a bullish stance, but strictly control positions to avoid short - term volatility risks [4]. - The callback of precious metals has a reasonable basis, but the hawkish policy stance of the next Fed Chairman has no fundamental impact on the long - cycle bull market of gold. It is expected that gold will rise in the medium and long term, and silver, platinum, and palladium will be stronger than gold in the medium term. Investors are advised to go long after the downward momentum of the precious metals sector weakens, while being vigilant against the medium - term risk that the Fed's tightening of monetary policy may end the precious metals bull market [6]. 3. Summary of Each Section 3.1 Precious Metals Market Conditions and Outlook - **Intraday Market**: London gold fluctuated between $5150 - 5200 per ounce, waiting for clearer guidance. The People's Bank of China's reduction of the foreign exchange risk reserve ratio for forward foreign exchange sales by financial institutions supported the prices of domestic precious metals. Zimbabwe's ban on lithium ore exports pushed up the prices of industrial precious metals such as silver, platinum, and palladium [4]. - **Domestic Precious Metals Market Data**: The closing prices of the Shanghai Gold Index, Shanghai Silver Index, Guangzhou Platinum Index, and Guangzhou Palladium Index increased by 0.12%, 2.22%, 5.81%, and 3.85% respectively. The trading volume and open interest of each variety also changed to varying degrees [5]. - **Medium - term Market**: The determination of the next Fed Chairman reduced the market's demand for safe - haven assets. The callback of precious metals was reasonable, but it did not change the long - and medium - term upward trend. The hawkish policy stance was more favorable to silver, platinum, and palladium compared to gold. Since November 2025, a large amount of investment capital has entered the precious metals market, increasing price volatility. The annualized volatility of gold and silver reached 30% and 80%, respectively [6]. 3.2 Precious Metals Market - related Charts The report presents multiple charts, including the Shanghai and London gold and silver futures and spot indices, the basis of Shanghai futures indices against Shanghai Gold TD, the holdings of gold and silver ETFs, the gold - to - silver ratio, and the correlation between London gold and other assets, with data sources from Wind and the Research and Development Department of CCB Futures [8][10][16]. 3.3 Major Macroeconomic Events/Data - The US International Trade Commission will conduct an investigation to evaluate the economic impact of revoking China's Permanent Normal Trade Relations status, with the results to be announced by August 21st. It will also consider a scenario of gradually imposing partial tariffs on important national security products over five years if Congress revokes the status [17]. - Oman, as a mediator, stated that the US and Iran made significant progress in nuclear - dispute negotiations. Both sides plan to return to their capitals for consultations and resume negotiations soon, with technical - level discussions scheduled in Vienna next week [17]. - The number of initial jobless claims in the US last week increased slightly by 4,000 to 212,000. The labor market remains stable, and the unemployment rate in February is expected to remain unchanged. It is expected that the Fed will not cut interest rates before Chairman Powell's term ends in May [17].

1. Report Industry Investment Rating No information provided in the report. 2. Core Viewpoints of the Report - The impact of RMB exchange rate on narrow - liquidity may be more about price rather than quantity. The central bank's attitude towards the rapid appreciation of the RMB may lead to a downward revision of the central bank's desired level of repo rates such as R007 [1][4][13] - Under the combined effect of RMB appreciation, central bank support, and neutral credit, the inter - bank liquidity may continue to be loose, but the equilibrium position of R007 may still be at 1.5, and the extremely low certificate of deposit spreads and credit spreads will continue [4][17] 3. Summary According to the Directory 3.1 RMB Exchange Rate's Impact on Narrow - Liquidity - On February 27, 2026, the central bank announced that starting from March 2, 2026, it would lower the foreign exchange risk reserve ratio for forward foreign exchange sales business from 20% to 0. Since the beginning of 2026, the RMB has continued to appreciate, and the appreciation rate has increased. The on - shore and off - shore RMB spreads have also continued to converge [2][11] - The one - sided movement of the RMB shows the resilience of the Chinese economy but also amplifies the short - term over - appreciation risk. The central bank's reduction of the foreign exchange risk reserve ratio often works in conjunction with positive efforts of the counter - cyclical factor and low repo rates. Preventing the short - term rapid appreciation of the RMB is the current policy focus of the central bank [3][12] - The market generally understands the impact mechanism of the RMB exchange rate on narrow - liquidity from the perspective of "quantity", but the report believes that "price" (the central bank's desired level of repo rates) is a more reasonable perspective. In January 2026, the month - on - month increase in the foreign exchange position item of the central bank's balance sheet was 53.1 billion yuan, which was negligible compared with the inter - bank excess reserves. When the exchange rate depreciation pressure is high, the counter - cyclical factor is significantly negative, the RMB liquidity in Hong Kong tightens, and the inter - bank repo rate (represented by R007) rises significantly [4][13] 3.2 Bond Spreads Related to the Funding Situation - The cash withdrawal rhythm of commercial banks is relatively fast, and under the combined effect of RMB appreciation, central bank support, and neutral credit, the inter - bank liquidity may continue to be loose, and the extremely low certificate of deposit spreads and credit spreads will continue [4][14][17] 3.3 Narrow - Liquidity 3.3.1 Central Bank Operations - Short - term liquidity: The central bank conducts "peak - shaving and valley - filling" operations. From February 24 to February 28, the net injection of pledged reverse repurchase was - 61.14 billion yuan. Medium - and long - term liquidity: MLF and outright reverse repurchases continue to have a net injection [18] 3.3.2 Institutional Lending and Borrowing Situations - The supply of funds (lenders) is at a seasonal high, and the demand for funds (borrowers) has a high absolute financing balance and a relatively low leverage ratio [24][33] 3.3.3 Repo Market Transaction Situations - The volume of funds is large and the price is stable, and the capital sentiment index continues to be loose [43][45] 3.3.4 Interest Rate Swaps - Interest rate swaps are fluctuating downward, with a slight decline in the cost of interest rate swaps, and the spread between CDs and IRS continues to be low [50][52] 3.4 Government Bonds 3.4.1 Next - Week Government Bond Net Payment - Past week: The total issuance of government bonds (treasury bonds + local government bonds) was 68.14 billion yuan, and the net payment was 19.04 billion yuan. Next week: The total issuance is expected to be 23.75 billion yuan, and the net payment is expected to be 14.10 billion yuan [55] 3.4.2 Government Bond Maturity Structure - As of February 27, the issuance of ultra - long - term bonds with a maturity of more than 10 years and the issuance maturity structures of treasury bonds and local government bonds in 2024, 2025, and 2026 are presented [56][59][60] 3.5 Certificates of Deposit (CDs) 3.5.1 Absolute Yield - The absolute yield of CDs is basically flat, and the yield curve of CDs has declined overall compared with before the Spring Festival holiday [61][62] 3.5.2 Issuance and Outstanding Situations - As of February 27, the issuance and outstanding balance structures of CDs of different types of banks are presented, including the issuance and balance proportions of different maturities [66][67] 3.5.3 Relative Valuation - Relevant spread analysis of CDs shows the spreads between CDs and R007, DR007, and 10 - year treasury bonds and their quantiles since 2020 [69]

Core Viewpoint - The recent acceleration of the RMB appreciation since late January 2026 has prompted the central bank to lower the foreign exchange risk reserve ratio on February 27, aiming to curb the rapid appreciation and stimulate forward foreign exchange demand [2][6]. Group 1: Reasons for Recent RMB Appreciation - Since the beginning of 2026, the RMB has continued to strengthen, with a notable acceleration since late January, breaking the 6.83 mark against the USD and approaching 6.80 [3][6]. - The annualized appreciation rate of the RMB against the USD accelerated to 24.6% in February, a historically rare occurrence, driven by seasonal settlement and a weaker USD [3][6]. - There are signs of a "panic settlement" effect, with high trading volumes indicating that the settlement trend may continue despite seasonal declines [3][18]. Group 2: Central Bank's Intervention - The central bank's decision to lower the foreign exchange risk reserve ratio from 20% to 0% is intended to provide a policy signal and stimulate forward foreign exchange purchases to alleviate the rapid appreciation of the RMB [4][67]. - Historical instances of similar interventions in September 2017 and October 2020 show that while these measures can smooth out the pace of appreciation, they have limited impact on the overall trend [4][67]. - The effectiveness of the recent adjustment may be constrained by banks' willingness to pass on cost savings to enterprises and the actual changes in purchasing behavior influenced by exchange rate expectations [29][67]. Group 3: Future Exchange Rate Trends - In the short term, the central bank's actions may lead to a temporary adjustment in the exchange rate, with historical data indicating that similar past interventions resulted in short-term adjustments of 3.2% and 0.4% over 15 and 3 trading days, respectively [5][40]. - The medium-term outlook suggests that market forces will continue to dominate the exchange rate, with the potential for sustained appreciation due to a larger "waiting to settle" scale and healthier fundamental conditions compared to previous cycles [5][60]. - Factors such as potential USD rebounds and increased trade tensions may affect the pace of RMB appreciation but are unlikely to reverse the long-term trend of steady appreciation [5][60].

1. Report Industry Investment Rating - Not provided in the content 2. Core Viewpoints of the Report - Since the beginning of 2026, the RMB has continued to strengthen, and there has been an acceleration since late January. The annualized appreciation rate of the RMB against the US dollar has accelerated to 24.6% since February, which is quite rare in history. The early stage of this round of appreciation was the result of the resonance of seasonal foreign exchange settlement and the weakening of the US dollar, but the further acceleration since late January has shown signs of "panic foreign exchange settlement" [2][63]. - On February 27, the central bank announced to lower the foreign exchange risk reserve ratio from 20% to 0% to boost the forward foreign exchange purchase demand of enterprises and alleviate the one - sided and rapid appreciation of the exchange rate. However, looking back at history, the central bank's regulatory tools mainly play a role in "adjusting the rhythm" and have relatively limited impact on the trend. If the RMB continues to appreciate, the foreign exchange deposit reserve ratio and cross - border financing macro - prudential parameters may also be used [3][63]. - In the short term, the central bank's "smoothing" operation may bring about a phased adjustment of the exchange rate, and there has been some "divergence" in the financial market. After the central bank lowered the foreign exchange risk reserve in September 2017 and October 2020, the RMB exchange rate adjusted by 3.2% and 0.4% respectively, lasting for 15 and 3 trading days. The options market has shown some "loosening" [4][63]. - In the medium term, the exchange rate trend is still dominated by market forces, and the appreciation may continue to some extent. Among the 9 rounds of RMB appreciation since the "811" exchange rate reform in 2015, the one in the second half of 2021 is similar to this round. Compared with that, the scale of "pending foreign exchange settlement" in this round is larger and the fundamental environment is healthier, which may mean that the appreciation still has some continuity. The possible rebound of the US dollar and the intensification of trade frictions may affect the appreciation rhythm of the RMB, but may not reverse the steady appreciation rhythm of the RMB exchange rate in the medium and long term [4][66]. 3. Summary According to the Directory 3.1 Hot Topic Thinking: Is the RMB Appreciation at a "Pause" or a "Variation"? 3.1.1 Why has the RMB Accelerated its Appreciation Recently? The "Herd Effect" of Foreign Exchange Settlement May be Emerging under Continuous Appreciation - Since the beginning of 2026, the RMB has continued to strengthen, and there has been an acceleration since late January. As of February 27, 2026, the offshore RMB once broke through the 6.83 mark and approached 6.80. From the perspective of the entire appreciation cycle, the appreciation from May to November 2025 was relatively stable, with an annualized appreciation rate of about 2.7%. However, since December, the appreciation speed has significantly accelerated, and the annualized appreciation rate has accelerated to 24.6% since February [2][12]. - The appreciation in January was the result of the resonance of the "year - end foreign exchange settlement tide" and the weakening of the US dollar. On the one hand, the "delayed" Spring Festival in February led to the continuation of the improvement of the foreign exchange settlement rate in January. The foreign exchange settlement rates in December 2025 and January 2026 were 61% and 59% respectively, both the highest values for the same months since 2017. The bank's customer foreign exchange settlement and sales surplus reached new highs and second - highs since the "811" exchange rate reform. On the other hand, the weakening of the US dollar also contributed, which was mainly driven by concerns about the intervention of the Japanese Ministry of Finance due to the continuous weakness of the Japanese yen exchange rate and the impact of issues such as the "Greenland Island" incident provoked by Trump [16]. - The further acceleration of appreciation since late January has shown signs of a "herd effect" and "panic defense". Since January 27, the US dollar has appreciated by 1.9%, while the RMB against the US dollar has still strengthened by 1.5%. High - frequency data shows that the inquiry trading volume of the US dollar against the RMB has remained at a relatively high level, indicating that the "foreign exchange settlement tide" may continue after the seasonal decline. The decline of the swap point spread in the "foreign exchange settlement tide" may be due to the further increase of the forward foreign exchange settlement rate, which reflects that the enterprise's "unilateral consensus" is gradually strengthening [23]. 3.1.2 Will the Central Bank's "Intervention" Reverse the Trend? Looking Back at History, it Will Smooth the Rhythm but is Difficult to Change the Trend - On February 27, 2026, the central bank announced to lower the foreign exchange risk reserve ratio for forward foreign exchange sales business from 20% to 0%. This tool aims to boost the forward foreign exchange purchase demand of enterprises to alleviate the one - sided and rapid appreciation of the exchange rate. From a mechanism perspective, lowering the foreign exchange risk reserve ratio has two meanings: signaling and supply - demand adjustment. However, looking at the two previous downward adjustments in September 2017 and October 2020, the effect of supply - demand adjustment mainly drives the continuation of the rebound rhythm of forward foreign exchange purchases, and the actual scale of foreign exchange purchases driven is relatively limited [27]. - This operation is a continuation of the central bank's counter - cyclical adjustment in the context of the rapid appreciation of the exchange rate. In the future, tools such as the cross - border financing macro - prudential adjustment parameter and the foreign exchange deposit reserve ratio may also be used. Looking back at history, if the RMB exchange rate continues to appreciate, these tools may be activated. Overall, the central bank's regulatory tools for the foreign exchange market mainly play a role in "adjusting the rhythm" and have relatively limited impact on the overall trend [30][35]. 3.1.3 How will the Exchange Rate Evolve in the Future? There May be a Phased Adjustment in the Short Term, and a Steady Appreciation Trend may Continue in the Medium and Long Term - In the short term, the central bank's "smoothing" operation may bring about a phased adjustment, and there has been some "divergence" in the financial market. Historically, after the central bank lowered the foreign exchange risk reserve in September 2017 and October 2020, the RMB exchange rate adjusted by 3.2% and 0.4% respectively, lasting for 15 and 3 trading days. The options market has shown some "loosening", with the 3 - month at - the - money option implied volatility rising slightly since January and the 25 - delta risk reversal factor rising continuously since January and turning positive again, indicating that some funds are using options to defend against the risk of RMB weakening [41]. - In the medium term, the exchange rate trend may still be dominated by market forces, and the second half of the appreciation cycle from 2020 to 2021 can be used as a reference. Compared with 2021, the scale of "pending foreign exchange settlement" in this round is larger and the fundamental environment is healthier, which may mean that the appreciation in the medium - and long - term perspective still has some continuity. Possible future events such as the rebound of the US dollar and the intensification of trade frictions may affect the appreciation rhythm of the RMB, but may not reverse the steady appreciation rhythm of the RMB exchange rate in the medium and long term [46][54]. 3.2 Large - scale Assets & Overseas Events & Data: The Three Major US Stock Indexes Fell Collectively, and the Prices of Gold and Silver Rose in Resonance 3.2.1 Large - scale Assets: The Three Major US Stock Indexes Fell Collectively, and the Prices of Gold and Silver Rose in Resonance - During the week, most developed - market stock indexes and emerging - market stock indexes rose. Among developed - market stock indexes, the Nikkei 225, the UK FTSE 100, and the Australian All Ordinaries Index rose by 3.6%, 2.1%, and 1.4% respectively. Among emerging - market stock indexes, the South Korean KOSPI, the Thai SET Index, and the Ho Chi Minh Index rose by 7.5%, 3.3%, and 3.1% respectively, while the Cairo CASE30, the Indian SENSEX30, and the Brazilian BOVESPA Index fell by 2.9%, 1.8%, and 0.9% respectively [67]. - Most sectors of the US S&P 500 rose during the week. The utilities, consumer staples, and healthcare sectors rose by 2.9%, 2.7%, and 2.1% respectively, while the information technology, financial, and consumer discretionary sectors fell by 2.2%, 2.0%, and 0.5% respectively. Most sectors in the eurozone also rose. The utilities, energy, and communication services sectors rose by 5.3%, 3.1%, and 2.9% respectively, while the healthcare, technology, and non - essential consumer sectors fell by 1.9%, 0.7%, and 0.6% respectively [69]. - The Hang Seng Index mostly fell during the week, but most sectors rose. The Hang Seng Tech Index and the Hang Seng China Enterprises Index fell by 1.4% and 1.1% respectively, while the Hang Seng Index rose by 0.8%. Among sectors, the raw materials, finance, and real estate construction sectors rose by 4.8%, 2.9%, and 2.8% respectively, while the healthcare, non - essential consumer, and information technology sectors fell by 5.0%, 1.8%, and 1.0% respectively [73]. - The 10 - year government bond yields of most developed countries declined during the week. The 10 - year US Treasury yield fell 11.0bp to 3.97%, the German 10 - year government bond yield fell 5.0bp to 2.76%, the UK 10 - year government bond yield fell 0.88bp to 4.36%, the French 10 - year government bond yield fell 8.4bp to 3.22%, the Italian 10 - year government bond yield fell 7.2bp to 3.28%, and the Japanese 10 - year government bond yield rose 4.3bp to 2.17% [75]. - The 10 - year government bond yields of most emerging markets declined during the week. Brazil's yield fell 10.6bp to 13.43%, India's fell 6.4bp to 6.66%, Vietnam's fell 0.3bp to 4.25%, South Africa's fell 2.5bp to 7.97%, Thailand's fell 17.3bp to 1.72%, and only Turkey's rose 207.0bp to 30.23% [78]. - The US dollar index declined during the week, and most other currencies appreciated against the US dollar. The US dollar index fell 0.1% to 97.64, the euro appreciated 0.3% against the US dollar, the pound sterling appreciated 0.5% against the US dollar, the Canadian dollar appreciated 0.3% against the US dollar, and the Japanese yen depreciated 0.7% against the US dollar. Most major emerging - market currencies appreciated against the US dollar. The Brazilian real appreciated 0.9% against the US dollar, the Philippine peso appreciated 0.7% against the US dollar, the South Korean won appreciated 0.5% against the US dollar, the Indonesian rupiah appreciated 0.4% against the US dollar, the Egyptian pound depreciated 0.8% against the US dollar, the Mexican peso depreciated 0.5% against the US dollar, and the Turkish lira depreciated 0.2% against the US dollar [80]. - The RMB appreciated against the US dollar during the week. The exchange rates of the US dollar against the on - shore and offshore RMB changed to 6.8559 and 6.8612 respectively. The Japanese yen depreciated 2.3% against the RMB, the pound sterling depreciated 1.7% against the RMB, and the euro depreciated 1.3% against the RMB [86]. - Most commodity prices rose during the week. Brent crude oil prices rose 1.0% to $72.5 per barrel, WTI crude oil prices rose 0.8% to $67.0 per barrel, LME nickel prices rose 3.2% to $17,880 per ton, glass prices rose 2.0% to 1,062 yuan per ton, and hog prices fell 0.1% to 11,485 yuan per ton. Non - ferrous metal prices and precious metal prices all rose. LME aluminum rose 2.8% to $3,163 per ton, LME copper rose 5.2% to $13,482 per ton, inflation expectations fell 3bp to 2.25%, COMEX silver prices rose 11.1% to $93.8 per ounce, COMEX gold prices rose 4.1% to $5,280.0 per ounce, and the real yield of the 10 - year US Treasury fell 8bp to 1.72% [90][95]. 3.2.2 US Treasury Bonds: The TGA Scale Declined, and the Net Issuance of US Treasury Bonds Declined - As of February 25, 2026, the US TGA balance dropped to $839 billion, significantly lower than at the end of January 2026. During the week (from February 23 to February 25, 2026), the net issuance of US Treasury bonds was flat compared with the previous week, with short - term Treasury bonds being issued at a relatively high scale on multiple days. The 15 - day rolling net issuance of US Treasury bonds recently dropped to $11.424 billion [99]. 3.2.3 US Fiscal Situation: The Cumulative US Fiscal Deficit Reached $250.4 Billion - As of February 24, 2026, the cumulative US fiscal deficit in the 2026 calendar year was $250.4 billion, compared with $303.6 billion in the same period last year. The cumulative expenditure was $1.2411 trillion, compared with $1.1822 trillion in the same period last year. The cumulative fiscal tax revenue was $782.8 billion, compared with $710.4 billion in the same period last year. The tariff revenue was $58.1 billion, compared with $11.3 billion in the same period last year [103]. 3.2.4 Federal Reserve: Waller Believes that the March Decision will Depend on the February Employment Data - In the past week, the public statements of Federal Reserve officials mainly focused on economic outlook, labor market signals, the impact of AI/productivity, inflation stickiness, and monetary policy stance, maintaining the cautious and data - dependent characteristics after the January FOMC meeting. Waller believes that the March decision will depend on the February employment data. Goolsbee believes that further progress in inflation is needed, and Barkin does not think that the Supreme Court's decision will have a significant impact on the inflation trend [109]. 3.2.5 PPI: The US PPI in January was Stronger than Expected - The US PPI (final demand) in January was 2.9% year - on - year and 0.5% month - on - month, stronger than market expectations. The contribution of the service component to the PPI increased, mainly driven by sub - items such as trade services, which may mean that the US PCE inflation faces upward pressure [115]. 3.2.6 Retail Sales: Japan's Retail Sales in January were Stronger than Expected - Japan's retail sales in January increased by 4.1% month - on - month, compared with a market expectation of 1.5%, and 1.8% year - on - year, compared with a market expectation of 0.1%. In terms of the month - on - month structure, the year - on - year growth rates of machinery and equipment and motor vehicles in January reached 12.4% and 9.6% respectively, which may be related to the fiscal stimulus measures introduced by the Japanese government [118]. 3.2.7 High - frequency Data: The Number of Unemployment Insurance Claims was Lower than Market Expectations - As of the week ending February 21, the initial unemployment insurance claims in the US were 212,000, lower than the market expectation of 216,000. As of the week ending February 14, the continued unemployment insurance claims were 1.833 million, lower than the market expectation of 1.858 million (both on a seasonally adjusted basis). From a non - seasonally adjusted perspective, the data of the two types of unemployment insurance claims in the US are in line with historical patterns [121]. 3.3 Global Macroeconomic Calendar: Pay Attention to the US Non - farm Payrolls - The report provides a global macroeconomic data calendar, highlighting the need to pay attention to the US non - farm payrolls data [131].