1. Report Industry Investment Rating - No industry investment rating is provided in the report. 2. Core Viewpoints of the Report - The expectation of a 7D OMO interest rate cut is rising, but there is no direct link between the decline in the marginal winning bid rate of 3M repurchase and the 7D OMO interest rate cut [1][9]. - Policy interest rate cuts are expected in the next two to three months as the internal and external factors restricting interest rate cuts have significantly eased, and the implementation of the policy depends on the economic situation [2][10]. - CD interest rates still have room to decline in the first half of this year. Assuming a 10bp cut in the 7D OMO interest rate, the spreads between the three - term CD interest rates and the 7D OMO will widen [3][16]. - The central bank does not intend to guide the monthly average of DR001 to rise to the same level as the 7D OMO interest rate. The monthly average of DR001 may be 1 - 7bp lower than the 7D OMO interest rate [3][17]. - Investors don't need to worry about the capital situation around the Spring Festival. There will likely be 6M repurchase and continuous 14D repurchase operations next week, and MLF operations will follow after the resumption of work [3][17]. - The probability that the 2026 GDP growth target is set at "4.5% to 5%" is not low. After the expectation of a 7D OMO interest rate cut is formed, the central level of the 10Y Treasury bond yield will "substantially" decline [4][20]. 3. Summary by Relevant Catalog 7D OMO Interest Rate Cut Expectation - Recently, the market's expectation of a 7D OMO interest rate cut has increased. Some investors believe that the decline in the 3M repurchase rate will force a 7D OMO interest rate cut. However, the marginal winning bid rate of repurchase and MLF is market - formed and has no direct link with the 7D OMO interest rate cut [1][9]. - Investors should focus on real - time market interest rates instead of over - focusing on the central bank's operation volume and winning bid rate [2][9]. CD Interest Rates - Since the end of the 2025 Central Economic Work Conference, the interest rates of 3M, 6M, and 1Y AAA - rated CDs have been steadily declining. As of February 6, 2026, they have decreased by 5bp, 6bp, and 8bp respectively from their highs in December 2025 [2][10]. - CD interest rates have room to decline in the first half of this year. Assuming a 10bp cut in the 7D OMO interest rate, the spreads between the three - term CD interest rates and the 7D OMO will expand compared to the median spreads since 25Q2 [3][16]. Repurchase Market Interest Rates - The report maintains the view in the January 23, 2026 report that the central bank does not intend to guide the monthly average of DR001 to rise to the same level as the 7D OMO interest rate. The monthly average of DR001 may be 1 - 7bp lower than the 7D OMO interest rate, with a larger difference in the beginning of the quarter and a smaller difference at the end of the quarter [3][17]. Capital Situation around the Spring Festival - There is no need to worry about the capital situation around the Spring Festival. The fluctuations in capital interest rates around the Spring Festival in the past two years have been precisely stabilized. Next week, there will likely be 6M repurchase and continuous 14D repurchase operations, and MLF operations will follow after the resumption of work [3][17]. Bond Market Interest Rates - The report maintains the view in the January 27, 2026 report that the probability that the 2026 GDP growth target is set at "4.5% to 5%" is not low. After the expectation of a 7D OMO interest rate cut is formed, the central level of the 10Y Treasury bond yield will "substantially" decline [4][20].

Report Industry Investment Rating - The report does not provide an industry investment rating [1][3][5] Core Viewpoints - Food prices continue to offset core inflation, and the low inflation of food may be persistent due to the slowdown in catering consumption growth and abundant supply of edible agricultural products. Policy rate cuts may face increased difficulty in a scenario where the stock market remains strong [1][3][7] Summary by Related Content CPI Analysis - In September, the core CPI continued to stabilize trend - wise, with a year - on - year increase of 1.0%. However, food prices offset core inflation, resulting in a slight year - on - year decline in the overall CPI. Food price increases were hindered by the slowdown in catering consumption growth, which may be persistent as catering consumption is now driven only by per - capita consumption demand growth. Abundant supply of edible agricultural products also suppresses food prices [3][6][7] PPI Analysis - In September, the PPI was flat month - on - month and continued to stabilize year - on - year. In the coal - steel industry chain, the coking coal spot price index in late September was close to the average level in December last year, and the futures main contract closing price fluctuated around the December average. But the price index of downstream rebar still had a gap compared to the December average. The decline in international oil prices in the first two weeks of October may put pressure on the October PPI [12][13] Policy Rate Analysis - Considering the continued improvement of the year - on - year PPI and core CPI indicators in September, the urgency of policy rate cuts is limited. The narrowing of commercial banks' net interest margins may still be a constraint on policy rate cuts. With the strong stock market, the year - on - year growth rate of commercial banks' time and other deposits has declined. If the stock market remains strong, it may be more difficult for commercial banks to further reduce deposit rates, and thus policy rate cuts may also face increased difficulty [3][13]

Report Summary 1. Report Industry Investment Rating The document does not mention the industry investment rating. 2. Core Viewpoints of the Report - In March 2025 inflation data, the year - on - year change rates of core and food CPI improved compared to the previous month. Energy price inflation in March was affected by trade friction uncertainties and is expected to face pressure in April [3][6]. - Upstream prices showed a stabilizing trend, reflecting improved domestic demand. Stable domestic demand gives China more leverage in external negotiations [3][12]. - Moderate inflation gives China's monetary policy greater flexibility, but policy rate cuts are still somewhat restricted by the low net interest margin of banks. Whether to cut rates may mainly depend on the impact of trade friction on residents' savings propensity [3][15]. 3. Summary by Related Catalogs Event - On April 10, 2025, the National Bureau of Statistics released March 2025 inflation data. In March, the national consumer price index (CPI) decreased by 0.1% year - on - year, with food prices down 1.4% and non - food prices up 0.2%. The CPI decreased by 0.4% month - on - month. The national industrial producer price index (PPI) decreased by 2.5% year - on - year and 0.4% month - on - month [5]. Comment - Core and food CPI: The year - on - year change rates of core and food CPI improved in March. The core CPI was flat month - on - month and up 0.5% year - on - year. The rent - related CPI increased by 0.1% month - on - month, and the year - on - year decline narrowed to 0.1%. The average daily trading area of commercial housing in 30 large and medium - sized cities in March was about 291,000 square meters, higher than that in March 2024 [6]. - Food CPI: After the Spring Festival, the food CPI decreased month - on - month, but the year - on - year decline converged. In March, the food CPI decreased by 1.4% month - on - month, and the year - on - year decline also narrowed to 1.4% [9]. - Energy price inflation: Affected by trade friction uncertainties, international oil prices in March decreased compared to February, driving down domestic oil prices. In April, energy inflation is expected to continue facing pressure due to increased trade friction risks and OPEC +'s decision to accelerate production in May [12]. - Upstream prices: The price indices of edible agricultural products and production materials showed signs of stabilization at the end of March, reflecting improved domestic demand. China's counter - tariffs on the US may affect the prices of imported products such as agricultural products, but the sources of agricultural product imports have become more diversified [12]. - Monetary policy: Moderate inflation gives China's monetary policy greater flexibility, but policy rate cuts are restricted by the low net interest margin of banks. Whether to cut rates may depend on the impact of trade friction on residents' savings propensity. If the savings propensity can drive down the bank's liability cost, the logic of policy rate cuts is more reasonable [15].