Core Insights - The People's Bank of China (PBOC) has resumed trading in government bonds, leading to a stable performance in the bond market, with the 10-year government bond yield dropping below 1.80% at one point on November 11 [1][2] - Analysts expect that the bond market will experience a range-bound fluctuation for the remainder of the year, influenced by regulatory policies, capital flows, and spillover effects from the stock market [1][3] Bond Market Performance - On November 11, government bond yields showed mixed movements, with the 30-year bond yield rising by 0.6 basis points to 2.1525%, while the 5-year bond yield fell by 0.25 basis points to 1.5250%, and the 10-year bond yield decreased by 0.1 basis points to 1.8040% [2] - The bond market has remained stable overall in November, with the PBOC's net purchase of government bonds amounting to 20 billion yuan in October, indicating limited impact on supply and demand dynamics [2][3] PBOC's Strategy - The PBOC's resumption of government bond trading is aimed at supporting year-end fiscal measures and maintaining liquidity, rather than aggressively driving down interest rates [3][4] - The PBOC's operations are primarily conducted in the secondary market, buying and selling existing government bonds to manage market liquidity [4] Market Sentiment and Future Outlook - The market perceives the PBOC's resumption of bond trading as a significant signal, stabilizing market expectations and encouraging investor confidence [6] - The bond market is expected to remain volatile, with analysts suggesting that investors should adopt a cautious approach and look for trading opportunities amid market fluctuations [6]

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The resumption of central bank bond purchases is mainly due to the objective need for base - money injection, and factors such as bond market supply - demand and yield curve shape no longer pose major constraints [2][17]. - After the resumption of bond purchases, the bond market curve may initially show a flattening trend, but in the future, it may tend to steepen, and attention should be paid to potential adjustment pressures after the positive news is realized [4][30]. - If there is no further easing expectation, the current 5BP pricing of the 10 - year active treasury bond may be relatively sufficient [4][31]. 3. Summary by Directory 3.1 This Year: Expectations' Repeated Fluctuations and Disappointments - In 2024 from August to December, the central bank's cumulative net bond - buying scale was 100 billion yuan. In January 2025, it announced a phased suspension of bond purchases in the open market [9]. - Reasons for the suspension in early 2025 include controllable government bond supply pressure, the availability of alternative liquidity management tools, and the need to avoid excessive market consensus expectations and potential interest - rate risks [9]. - From the perspective of curve regulation, the operation space was relatively limited at that time. Net selling of bonds to tighten liquidity was unlikely, and achieving a balance in "buying short and selling long" was restricted by the central bank's long - term bond holdings [10]. - Market expectations for the resumption of bond purchases have repeatedly fermented since June, mainly due to the need to improve the monetary policy toolbox, the market's expectation during the bond market adjustment, and the large - scale banks' increased short - term bond purchases [14][15]. 3.2 Reasons for Resuming Bond Purchases - The resumption is mainly due to the objective need for base - money injection. In the fourth quarter, the maturity scale of medium - and long - term liquidity is high, and there is also potential demand for liquidity, such as high - interest time - deposit maturities and the potential for new policy - based financial instruments to drive credit [17]. - Bond supply scale and the desired interest - rate level are not the main considerations for resuming bond purchases. Currently, government bond supply is nearing the end, and the bond market has previously faced interest - rate increases without resuming bond purchases [23]. - The weakening of bond demand, as reflected by the widening of the primary - secondary market spread of 30 - year treasury bonds since July, provides a logical basis for resuming bond purchases [3][27]. - In terms of the form of bond - buying operations, the scale may be more cautiously controlled this year, "buying short" may dominate, and "selling long" may not necessarily occur [3][29]. 3.3 Bond Market Pricing - Logically, bond purchases will benefit short - term bonds and steepen the curve. However, if large - scale banks have already held a large amount of short - term bonds and reduce their secondary - market replenishment, the impact on the curve may converge [4][30]. - On October 27, the curve flattened, which may indicate that the bond market's strength was driven by the restoration of buying confidence. Resuming bond purchases does not necessarily mean a prelude to reserve - requirement ratio cuts or interest - rate cuts [4][30]. - If there is no further easing expectation, the current 5BP pricing of the 10 - year active treasury bond may be relatively sufficient. In the future, the curve may steepen, and attention should be paid to potential adjustment pressures [4][31].

Core Viewpoint - The People's Bank of China (PBOC) will resume open market operations for government bond trading to support market demand and implement a moderately loose monetary policy [1] Group 1: Background - The peak of government bond issuance has passed, and current bond purchases aim to protect demand and avoid excessive volatility in the bond market, which could hinder the transmission of policies to lower overall financing costs [1] - The overall operation of the bond market is stable, and the direct impact of PBOC's bond purchases on the market is manageable [1] - Economic pressures persist, and purchasing bonds to inject liquidity is a necessary aspect of implementing a moderately loose policy [1] Group 2: Pathways - The PBOC may purchase bonds from bank inventories or in the secondary market [1] - Direct purchases from primary dealers' inventories can effectively target liquidity injection with minimal market impact, likely leading to a simultaneous reduction in reserve requirements [1] - Alternatively, purchasing bonds in the secondary market can provide liquidity to a broader range of entities, aligning with future monetary policy frameworks [1] Group 3: Direction - In the short term, net purchases of bonds are expected to dominate [1] - Given the constraints on social credit expansion due to weak economic momentum, government credit expansion remains a crucial driver for economic development [1] - The PBOC's bond trading tools can be used for both buying and selling, with future sales depending on actual needs [1] Group 4: Scale - The expected monthly net purchases of government bonds may not significantly exceed those in 2024 [1] - With government bond issuance for 2025 nearing completion, the demand for monetary policy support is expected to weaken [1] - The bond trading tools can largely be substituted by MLF and reverse repos, suggesting that while bond purchase scales may expand, it could coincide with a reduction in MLF and reverse repo operations [1] Group 5: Impact - Short-term effects may provide a temporary boost, but the positive impact may not be sustainable, with medium to long-term effects likely being neutral [1] - In 2024, PBOC's bond purchases contributed to lowering short-term rates and somewhat facilitated long-term declines, indicating a cautious approach in future bond trading implementation and communication with the market [1] - The core issue in the bond market remains the cost-effectiveness of fixed-income assets, with limited short-term upside for long-duration assets [1]