Report Industry Investment Rating No relevant content provided. Core Viewpoints - Affected by the strong stock market, the recovery of risk appetite suppresses the bond market. Meanwhile, the probability of the Fed cutting interest rates in September exceeds 95%, and the increasing global trade uncertainty adds to the uncertainty of foreign capital inflows. Overall, the bond market fluctuates between the expectations of stable growth and monetary easing. Short - term attention should be paid to policy signals at the end of the month [3]. - The price of Treasury bond futures fluctuates. It is recommended to short the 2509 contract on rallies. For arbitrage, pay attention to the decline of the basis of TF2509. For hedging, as there is medium - term adjustment pressure, short - side investors can use far - month contracts for moderate hedging [4][5]. Summary by Directory 1. Interest Rate Pricing Tracking Indicators - Price indicators: China's monthly CPI has a 0.40% month - on - month increase and 0.00% year - on - year change; monthly PPI has a - 0.20% month - on - month and - 3.60% year - on - year change [9]. - Monthly economic indicators: Social financing scale is 431.26 trillion yuan, with a 1.04 - trillion - yuan month - on - month increase and 0.24% growth rate; M2 year - on - year is 8.80%, up 0.50% from the previous period with a 6.02% growth rate; manufacturing PMI is 49.30%, down 0.40% from the previous period with a - 0.80% growth rate [9]. - Daily economic indicators: The US dollar index is 97.78, down 0.28 with a - 0.29% change; the offshore US dollar - to - RMB exchange rate is 7.1817, down 0.009 with a - 0.13% change; SHIBOR 7 - day is 1.43, up 0.00 with a 0.07% change; DR007 is 1.45, up 0.01 with a 0.54% change; R007 is 1.56, down 0.12 with a - 7.38% change; the 3 - month inter - bank certificate of deposit (AAA) is 1.53, down 0.01 with a - 0.65% change; the AA - AAA credit spread (1Y) is 0.08, down 0.01 with a - 0.65% change [10]. 2. Overview of Treasury Bonds and Treasury Bond Futures Market - Multiple charts are provided to show the closing price trend, price change rate, precipitation of funds, position ratio, net position ratio (top 20), long - short position ratio (top 20), spread between government - issued bonds and Treasury bonds, and Treasury bond issuance of Treasury bond futures main contracts [13][16][18]. 3. Overview of the Money Market Funding Situation - Multiple charts are provided to show the Shibor interest rate trend, the maturity yield trend of inter - bank certificates of deposit (AAA), the trading statistics of inter - bank pledged repurchase, and the local government bond issuance [32][28]. 4. Spread Overview - Multiple charts are provided to show the inter - term spread trend of Treasury bond futures, the term spread of spot bonds and the cross - variety spread of futures [31][38]. 5. Two - Year Treasury Bond Futures - Multiple charts are provided to show the implied interest rate and Treasury bond yield of the TS main contract, the IRR and funding rate of the TS main contract, and the basis and net basis trends of the TS main contract in the past three years [41][43][52]. 6. Five - Year Treasury Bond Futures - Multiple charts are provided to show the implied interest rate and Treasury bond yield of the TF main contract, the IRR and funding rate of the TF main contract, and the basis and net basis trends of the TF main contract in the past three years [50][54][51]. 7. Ten - Year Treasury Bond Futures - Multiple charts are provided to show the implied interest rate and Treasury bond yield of the T main contract, the IRR and funding rate of the T main contract, and the basis and net basis trends of the T main contract in the past three years [58][60][61]. 8. Thirty - Year Treasury Bond Futures - Multiple charts are provided to show the implied interest rate and Treasury bond yield of the TL main contract, the IRR and funding rate of the TL main contract, and the basis and net basis trends of the TL main contract in the past three years [66][69][72].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The overseas macro - environment is better than the previous cycle. The contraction of the US manufacturing industry is offset by the growth of personal consumption, leading to a significant decline in inflation without a notable increase in unemployment. With the Fed's good expectation management, the current economic cycle has the conditions for a "soft landing", and the liquidity release caused by preventive interest rate cuts is beneficial to commodities. In Europe, the "free - market logic" is more clearly transmitted. When inflation falls to a controllable range, interest rate cuts will stimulate manufacturing expansion and increase in terminal consumption. The current high policy interest rate of the Eurozone central bank is a more favorable condition than in 2010 - 2015 [1][44]. - The domestic macro - environment is weaker than the previous cycle. The rapid decline of M1, the positive scissors - difference between M2 and the year - on - year growth of social financing stock, and the widening of the scissors - difference between M1 and M2 reflect the decline in social financing demand and the decrease in market risk preference. However, the appreciation of the RMB caused by overseas interest rate cuts is conducive to the implementation of domestic monetary policies. In the real estate industry, high household leverage and urbanization rates restrict the maneuvering space of the current real estate cycle. High inventory of commercial housing and insufficient potential purchasing power will lead to a deeper active de - stocking. In the manufacturing industry, changes in domestic consumption structure and the increase in potential external demand make the current manufacturing cycle more resilient. Although infrastructure funds are still increasing, they are mainly invested in new - quality productivity industries such as electricity, and the growth rate of traditional steel - consuming industries is gradually declining. China's steel exports have an obvious characteristic of trading price for volume. Although there are more trade barriers, cost advantages ensure that the export volume can still be maintained [2][44]. 3. Summary According to the Directory 3.1 Overseas Macro - environment Comparison 3.1.1 US: Interest Rate Cuts Lead to Liquidity Release and Commodities Benefit - In the 2010 - 2015 cycle, the US market was relatively stable with a low federal funds target rate of 0.25% from December 2008 to December 2015. Unemployment rate declined year - by - year, CPI and core CPI fluctuated within a controllable range, PMI data showed manufacturing expansion, and personal consumption expenditure was stable. In the current cycle, the federal funds target rate is 4.50%, with strong potential for interest rate cuts to release liquidity. The continuous significant decline in CPI and core CPI and the stable labor market lay the foundation for preventive interest rate cuts and a soft landing of the economy. The expected interest rate cuts will release liquidity in the money market, which is beneficial to commodities [5]. 3.1.2 Europe: Potential for Liquidity Release - Europe's "free - market logic" is more clearly transmitted due to the unified management of the euro by the European Central Bank system and the large differences in economic volume and resilience among EU member states. Previous interest rate hikes suppressed terminal demand, causing CPI and manufacturing PMI to decline. When inflation falls to a controllable range, interest rate cuts will stimulate manufacturing expansion and terminal consumption. The current high policy interest rate of the Eurozone central bank is a more favorable condition than in 2010 - 2015 [11]. 3.2 Domestic Macro - and Meso - level Comparison 3.2.1 Fiscal Policy and Monetary Policy - M1 has contracted more severely in this cycle, indicating greater economic downward pressure. In terms of steel consumption potential, it may be weaker than the previous cycle as households are restricted by the real estate market and local governments are burdened with debt, while the central government still has room to increase leverage. The year - on - year growth of social financing stock has been lower than that of M2 since early 2022, and the widening scissors - difference between M1 and M2 shows a decrease in market risk preference. There is still room to reduce the RMB deposit reserve ratio and LPR, and the appreciation of the RMB after the Fed's interest rate cuts provides space for the implementation of domestic monetary policies [14][16][18]. 3.2.2 Real Estate Industry: Active De - stocking Continues and Downward Pressure is Greater than the Previous Cycle - The real estate industry is a pro - cyclical industry. There is a positive correlation between steel prices and real estate development investment, and M1 and commercial housing sales generally move in the same direction. In this cycle, the real estate industry has greater downward pressure. The real estate development investment and funds have been in negative growth since 2022, and the high household leverage and urbanization rates limit the maneuvering space. The inventory of commercial housing is increasing, and it is more difficult to reduce inventory through price increases. The active de - stocking behavior caused by weak supply and demand may lead to a decline in real estate - related commodity prices [20][22][24]. 3.2.3 Manufacturing Industry: Domestic and External Demands Show Resonance - The manufacturing industry is a pro - cyclical industry, and there is a positive correlation between steel prices and manufacturing investment. In the 2010 - 2015 cycle, manufacturing investment declined from 30% to 5%. In the current cycle, manufacturing investment has been stable at around 10%, supported by new energy vehicles, ships, containers, and policy incentives. The "two - new" support funds in 2025 are 300 billion yuan, twice that of 2024, which is conducive to the benign cycle of domestic demand. There is a positive correlation between China's export amount and the PMI of European and American manufacturing industries, indicating resonance between domestic and external demands. The US economy may achieve a soft landing, and there is a possibility of upward resonance of domestic and external demands, which will not drag down steel consumption [30][33]. 3.2.4 Infrastructure: New - quality Productivity Industries Gain Momentum while Traditional Steel - consuming Industries Slow Down - Infrastructure is a counter - cyclical adjustment tool, and there is an inverse correlation between infrastructure investment growth rate and steel prices. In the 2010 - 2016 period, local governments were the main entities for leveraging through urban investment bonds. After 2022, with the decline in land transfer revenue, the proportion of special bonds increased, and policy - based development tools and ultra - long - term treasury bonds can also supplement infrastructure funds. Although the total infrastructure funds are still increasing, the investment is mainly in new - quality productivity industries such as electricity, and the growth rate of traditional steel - consuming industries such as roads, railways, and public facilities is gradually declining [35][37][39]. 3.2.5 Export: Trading Price for Volume, Pattern Remains Unchanged - China's steel exports have an obvious characteristic of trading price for volume, with an inverse correlation between export quantity and price since 2007. When domestic demand is strong, exports are restricted; when domestic demand is weak, high production leads to an exploration of export paths. Since 2022, some overseas countries have imposed high tariffs or conducted anti - dumping investigations on Chinese steel products, increasing export costs and slightly reducing export volume. However, due to cost advantages, China's steel still has global appeal, and the high - volume export pattern is difficult to change. About 70% of steel exports go to Asia, and the trade pattern has been basically stable since 2010 [42][43].

Investment Rating - The industry investment rating is "Outperform the Market" indicating an expected relative increase of over 10% in the industry index compared to the broader market within the next six months [23]. Core Insights - In May, the social financing (社融) stock growth rate was 8.7%, remaining stable compared to April, with new social financing of 2.29 trillion yuan, which is an increase of 0.2 trillion yuan year-on-year. This growth is primarily driven by policy factors, particularly the accelerated issuance of government bonds [3][10]. - The net financing scale of government bonds in May was 1.46 trillion yuan, also reflecting a year-on-year increase of 0.2 trillion yuan. The total social financing stock reached 426 trillion yuan by the end of May [3][10]. - Demand from enterprises remains weak, with new loans to enterprises in May amounting to 530 billion yuan, a decrease compared to the previous year. However, short-term loans and bond financing showed some improvement due to low base effects and policy influences [3][15]. Summary by Sections Social Financing and Loan Growth - The social financing stock growth rate in May was 8.7%, consistent with April's rate, with a total stock of 426 trillion yuan [3][10]. - New RMB loans in May totaled 620 billion yuan, significantly lower than the 960 billion yuan in May 2024, with the total loan balance reaching 266.3 trillion yuan, growing at 7.1% year-on-year [12][14]. Investment Strategy - Fiscal deposits remain high, indicating potential for further fiscal spending, which is expected to support economic growth. The focus of monetary policy is on the implementation of existing policies, with a need to monitor the recovery of demand [4][20]. - The banking sector's performance is anticipated to gradually recover due to the positive contribution of deposit repricing to net interest margins and a decrease in bond market volatility [4][20]. M1 and M2 Growth - M2 growth in May was 7.9%, with a slight decrease of 0.1% compared to the previous month. M1 growth was 2.3%, showing an increase of 0.8% from the previous month, primarily due to a low base effect from the previous year [19][22].

Group 1: Financial Data Overview - In May 2025, the credit balance decreased by 0.1 percentage points to 7.1% year-on-year[1] - The total social financing stock remained flat at 8.7% year-on-year[1] - M2 growth declined by 0.1 percentage points to 7.9% year-on-year[1] Group 2: M1 Growth and Influencing Factors - M1 growth rebounded by 0.8 percentage points to 2.3% year-on-year, exceeding market expectations of 1.8%[2] - The rebound in M1 is attributed to a low base effect from last year's "funds anti-circulation" policy and a marginal recovery in real estate sales[2] - The decline in corporate medium and long-term loans has persisted for two consecutive months, with a reduction exceeding 150 billion yuan, linked to a widening decline in PPI[2] Group 3: Social Financing and Government Bonds - The growth rate of social financing stock increased from 8.0% at the end of 2024 to 8.7% due to the "front-loaded" net financing of government bonds[3] - In May, the net financing of government bonds remained high but the year-on-year increase narrowed to 236.7 billion yuan[3] - The phase of rapid improvement in social financing driven by fiscal financing may be coming to an end[3] Group 4: Credit and Loan Trends - In May, new credit amounted to 620 billion yuan, a year-on-year decrease of 330 billion yuan, primarily due to corporate medium and long-term loans[4] - New social financing in May was 2,287.1 billion yuan, a year-on-year increase of 224.8 billion yuan, mainly from government bonds[4] - The structure of deposits showed that household deposits increased by 470 billion yuan, while corporate deposits decreased by 417.6 billion yuan[5]

Core Viewpoints - The core viewpoint indicates that with the strengthening of internal policies and the alleviation of external shocks, the expectations of micro entities may stabilize in the future [3][8][46] - The sudden increase in M2 year-on-year growth in April is primarily due to the rapid replenishment of non-bank deposits, which may be related to effective macro policies responding to tariff shocks, leading to accelerated capital market replenishment [3][46] - The April deposit data shows that non-bank deposits increased by 1.6 trillion, a year-on-year increase of 1.9 trillion, which is the main source of M2's year-on-year recovery [3][46] Financial Data Summary - In April, the credit balance decreased by 0.2 percentage points year-on-year to 7.2%, while the social financing stock increased by 0.3 percentage points to 8.7%, and M2 increased by 1.0 percentage points to 8.0% [2][7][45] - The structure of social financing in April showed characteristics of "government bonds leading, corporate bonds improving," with government bonds increasing by 10.666 billion year-on-year, marking the third consecutive month of over 10 billion increase [20][32][49] - The April social financing increased by 11.591 billion, a year-on-year increase of 12.249 billion, with corporate bond financing recovering [32][49] Credit Performance - In April, corporate credit exhibited a pattern of "loan decline and bond financing recovery," with short-term loans declining possibly due to previous "rush" and medium to long-term loans showing less increase due to debt resolution progress and tariff shock impacting corporate expectations [12][20][46] - The April resident credit performance was described as "tepid," with employment market pressures and tariff disturbances leading to a cautious debt attitude among residents [15][47] - The BCI enterprise recruitment index remained below 50 for two consecutive months (March-April), reflecting the pressure on the employment market [15][47] Future Outlook - The combination of policy measures and the alleviation of external shocks is expected to resonate, potentially stabilizing micro entity expectations [25][48] - On May 7, the central bank announced ten specific measures including a 50 basis point reserve requirement ratio cut and a 10 basis point interest rate cut, reinforcing support for the capital market, real estate market, and private economy [25][48] - The phase-wise easing of China-US trade tensions is anticipated to further improve micro entity expectations and stabilize the release of corporate credit demand [25][48]

Group 1: Financial Data Overview - In April 2025, M2 increased by 1.0 percentage points year-on-year to 8.0%[1] - The total credit balance decreased by 0.2 percentage points year-on-year to 7.2%[9] - Social financing stock rose by 0.3 percentage points year-on-year to 8.7%[9] Group 2: Key Drivers of M2 Growth - The surge in M2 was primarily driven by a rapid replenishment of non-bank deposits, which increased by 1.6 trillion RMB, a year-on-year increase of 1.9 trillion RMB[10] - Non-bank deposits had previously decreased by 1.3 trillion RMB in March, indicating a significant recovery in April[10] - The influx of funds into the capital market was influenced by effective macro policies responding to tariff shocks[10] Group 3: Credit and Financing Trends - In April, corporate credit showed a pattern of "loan decline and bond financing recovery," with short-term loans decreasing due to prior "rush" in March[11] - Long-term loans saw a year-on-year decrease of 250 billion RMB, influenced by tariff shocks and ongoing debt resolution processes[11] - Total new credit in April was 280 billion RMB, a year-on-year decrease of 450 billion RMB, primarily due to corporate sector declines[23] Group 4: Government and Corporate Bonds - Government bonds increased by 972.9 billion RMB in April, a year-on-year increase of 10,666 billion RMB, marking the third consecutive month of over 1 trillion RMB increase[17] - Corporate bonds improved with an increase of 234 billion RMB in April, a year-on-year increase of 633 billion RMB, countering weak credit performance[17] Group 5: Consumer Credit and Market Sentiment - Consumer credit remained subdued, with pressures from the job market and tariff-induced expectations leading to a cautious debt attitude among households[15] - The BCI (Business Confidence Index) for hiring remained below 50 for two consecutive months, reflecting employment market pressures[15]

Core Viewpoints - The sudden increase in M2 growth in April is primarily due to a rapid recovery of non-bank deposits, which is linked to effective macro policies responding to tariff shocks, leading to accelerated capital market recovery [3][8][46] - The credit landscape in April shows a pattern of "loan decline and bond financing recovery," with short-term loans decreasing due to previous surges, while medium to long-term loans saw a smaller increase, influenced by debt resolution progress and tariff shock impacting corporate expectations [12][20][46] Financial Data Summary - In April, the total new credit was 280 billion, a year-on-year decrease of 450 billion, mainly due to the corporate sector [26][49] - The total social financing (社融) increased by 1,159.1 billion, a year-on-year increase of 1,224.9 billion, with corporate bond financing showing signs of recovery [32][49] - M2 increased by 1.0 percentage points year-on-year to 8.0%, while M1 decreased by 0.1 percentage points to 1.5% [39][50] Resident and Corporate Credit Trends - Resident credit remained subdued, with a cautious debt attitude due to employment market pressures and tariff disturbances, reflected in the BCI enterprise hiring index remaining below 50 for two consecutive months [15][47] - The structure of social financing in April showed a dominance of government bonds and improvement in corporate bonds, with government bonds increasing by 10,666 billion year-on-year [20][48] Future Outlook - The combination of policy measures and easing external shocks is expected to stabilize microeconomic expectations, with the central bank announcing ten specific measures to support capital markets, real estate, and the private economy [25][48] - The recent easing of US-China trade tensions is anticipated to further improve microeconomic expectations and stabilize corporate credit demand [25][48]

Core Viewpoints - The recovery in March credit data is primarily driven by an increase in short-term loans from enterprises, while the growth of medium- to long-term loans, which reflect enterprise investment demand, remains relatively subdued. The total new credit in March reached 3.64 trillion yuan, significantly exceeding the market expectation of 2.93 trillion yuan, with a year-on-year increase of 550 billion yuan [2][8][47] - The year-on-year growth rate of social financing stock rebounded by 0.2 percentage points to 8.4%, mainly driven by the advance of fiscal financing, which may become a key feature of fiscal policy execution this year. In March, net financing from government bonds reached 1.48 trillion yuan, an increase of 1.02 trillion yuan year-on-year [2][14][47] Credit and Financing Data - In March, new credit totaled 3.64 trillion yuan, with a year-on-year increase of 550 billion yuan, primarily due to the rise in short-term loans from enterprises. The breakdown shows that household loans increased by 985.3 billion yuan, with short-term loans contributing 484.1 billion yuan and medium- to long-term loans adding 504.7 billion yuan [4][22][49] - The total social financing in March was 5.88 trillion yuan, a year-on-year increase of 1.05 trillion yuan, with RMB loans being the main support. Government bond net financing remained high, while corporate bond financing showed a significant decline [30][49] Monetary Aggregates - M2 remained stable at a year-on-year growth rate of 7.0%, while the new M1 showed a recovery of 1.5 percentage points to 1.6%. The deposit structure indicates that household deposits increased by 3.09 trillion yuan, and corporate deposits rose by 2.84 trillion yuan, while fiscal deposits decreased by 771 billion yuan [5][39][50]