1. Report Industry Investment Rating No information provided in the document. 2. Core View of the Report - From January 20th to January 26th, the bond market seller sentiment index declined, while the buyer sentiment index started to rise from negative to 0. The bond market allocation force steadily entered the market, and the suppression of the equity market slowed down, driving the long - term bonds to have a repair market. However, the expected time for reserve requirement ratio cuts and interest rate cuts is still far off, and the market has a strong expectation of range - bound fluctuations in the market. The seller sentiment cooled slightly, and the market's judgment on the subsequent space remains cautious [5]. 3. Summary According to the Directory 3.1 Seller Market Sentiment 3.1.1 Seller Market Interest Rate Bond Sentiment Index - From January 20th to January 26th, the unweighted tracking index was 0.07, a decrease of 0.07 compared with January 13th - January 19th. Some institutional market views turned neutral. Currently, institutions generally hold a neutral - to - bullish view, with 5 bullish, 22 neutral, and 3 bearish. 17% of institutions are bullish, believing that the warming of easing expectations and the decline in capital interest rates establish a favorable environment, combined with fundamental support and reverse layout opportunities. The bond market has a ceiling but also room below, showing a short - term bearish and long - term bullish pattern. 73% of institutions are neutral, thinking that the recovery of the fundamentals and supply pressure pose a suppression, but the allocation force and loose capital supply provide support, and the regulatory desirable range restricts the downward space. The bond market may maintain range - bound fluctuations. 10% of institutions are bearish, expecting that the lack of confidence during the "15th Five - Year Plan" period is expected to reverse, the long - term low - interest - rate expectation faces correction, and in the short term, under the suppression of supply shocks and the recovery of risk appetite, the bond market still has downward pressure [13]. 3.1.2 Buyer Market Interest Rate Bond Sentiment Index - From January 20th to January 26th, the unweighted tracking sentiment index was 0.00, an increase of 0.15 compared with January 13th - January 19th. The sentiment index started to rise from negative to 0. Currently, institutions generally hold a neutral view, with 5 bullish, 16 neutral, and 5 bearish. 19% of institutions are bullish, believing that the expected cooling of the stock market and hedging demand form a bullish support. The long - term decline of the population and real estate cycles establishes a low - interest - rate environment, combined with the warming of expectations for reserve requirement ratio cuts and interest rate cuts and the alleviation of previous suppression factors, the bond market sentiment is significantly bullish. 62% of institutions are neutral, stating that although the expectation of MLF interest rate cuts and moderately loose monetary policy provide some support, under the money - attracting effect of the stock market and the constraints of the central bank's desirable range, the bond market may maintain a volatile pattern. 19% of institutions are bearish, believing that the long - term fundamentals weaken under the expectation of stable inflation and economic improvement, combined with the supply pressure of ultra - long - term bonds and credit risk disturbances. Without new bullish factors, it is difficult to break through the central bank's range downward [14].

Group 1: Macroeconomic Environment - The domestic macroeconomic regulation has intensified since the third quarter, with a combination of policies showing gradual effects, creating a favorable monetary and financial environment for economic recovery [1] - The People's Bank of China (PBOC) has maintained a moderately loose monetary policy, injecting liquidity into the market through various tools, including Medium-term Lending Facility (MLF) and reverse repos [2][3] Group 2: Market Performance - In the interbank market, the total transaction volume reached 654.7 trillion yuan, reflecting a quarter-on-quarter increase of 16.3% and a year-on-year increase of 17.7% [1] - The A-share market has shown strong performance, influenced by factors such as the "anti-involution" trend, new tax regulations on bond issuance, and changes in public fund fee structures [1] Group 3: Interest Rates and Liquidity - The overall funding rates have declined in the third quarter, with the weighted average of overnight repo rates dropping by 13 basis points to 1.38% and 14 basis points to 1.43% for different types of repos [3] - The PBOC's net injection of funds in the open market totaled 19,348 billion yuan in the third quarter, with MLF and reverse repos contributing significantly to this liquidity [2] Group 4: Bond Market Dynamics - The bond market saw an issuance of 14.88 trillion yuan in the third quarter, with a quarter-on-quarter growth of 0.7% and a year-on-year growth of 4.7% [4] - Long-term bond yields have experienced fluctuations, with the 10-year government bond yield ranging between 1.64% and 1.9%, reflecting a steepening yield curve [4] Group 5: Interest Rate Swaps - The interest rate swap curve has shifted upward, with significant increases in long-term rates, indicating a growing market for interest rate swaps [7] - The average daily transaction volume for RMB interest rate swaps increased, with a total nominal principal amount of 12.2 trillion yuan in the third quarter [7]

Market Performance - The closing of treasury futures showed mixed results, with the 30-year main contract down by 0.04%, while the 10-year main contract rose by 0.01% [1] - The yield on the 30-year government bond "23附息国债23" decreased by 0.1 basis points to 1.9150% [1] - The yield on the 10-year government bond "25附息国债04" increased by 1.1 basis points to 1.685% [1] Funding Conditions - The central bank announced a 7-day reverse repo operation of 154.5 billion yuan at a fixed rate of 1.40%, resulting in a net injection of 90 billion yuan for the day [2] - The overnight and 7-day pledged repo rates in the interbank market continued to decline, down by approximately 3 basis points and 0.5 basis points, respectively [2] - The central bank is expected to conduct a 500 billion yuan MLF operation on May 23, 2025, to continue injecting medium- and long-term funds [2] Operational Recommendations - The bond market is expected to enter a phase of fluctuation, with limited risk of decline in treasury bonds due to the ongoing counter-cyclical policy [3] - The 10-year government bond yield is anticipated to fluctuate within the range of 1.65% to 1.7%, while the 30-year bond yield is expected to be between 1.85% and 1.95% [3] - A cautious approach is recommended, focusing on high-frequency economic data and funding dynamics [3]

Core Viewpoint - The report from Guotai Junan Securities indicates a strong expectation for a decline in funding rates, suggesting a shift in bond market strategy from duration to coupon-based approaches [1] Group 1: Market Strategy - The current pace of expected monetary easing through reserve requirement ratio (RRR) cuts and interest rate reductions may be slower than anticipated, but the certainty of declining funding rates is strong [1] - The recommendation is to switch from duration strategies to coupon strategies, utilizing pledged financing to moderately increase leverage and enhance static returns [1] Group 2: Investment Focus - The report highlights a focus on long-end credit bonds, perpetual bonds, policy bank bonds, and ultra-long local government bonds, which exhibit coupon convexity characteristics [1] - It is anticipated that the funding central tendency will gradually decrease, with the 7-day repurchase rate (DR007) for deposit-taking institutions expected to have a downward space of over 10 basis points, potentially aligning with the 7-day reverse repo operation rate in the open market [1]