1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The current VAT policy on bonds is short - term positive and long - term neutral. In the short term, it is beneficial to existing bonds, potentially triggering a pre - layout market for "snapping up old bonds." However, the expected continued decline in interest rates on Monday did not occur, as the improvement in the stock market weakened the bond market, and the "rumor" of the China Development Bank bonds drove up the long - term Treasury bond rates. In the medium term, the policy impact on the bond market tends to be neutral. Despite the intention to divert funds to the stock market, the trend of funds chasing the bond market is difficult to completely reverse due to the "asset shortage" and loose liquidity [2][3][21][22] 3. Summary by Relevant Catalogs 3.1 Interest Rate Bonds Data Review for Last Week - **Funds Interest Rates**: In the week of August 1st, after a slight increase at the end of July, the funds interest rates started to decline. DR001 reached 1.46% on July 28th and then fluctuated down to 1.31%, with a weekly fluctuation of 15BP; R001 rose to 1.56% on July 31st and dropped to 1.35% on August 1st, with a weekly fluctuation of 21BP. DR007 fell from 1.58% on July 28th to 1.42% on August 1st, a decline of 16BP; FR007 dropped from 1.64% to 1.50%, a weekly decline of 14BP [8] - **Open Market Operations**: The central bank's reverse repurchase volume increased slightly to 1.66 trillion yuan, with a similar total maturity volume. The net capital injection was small, and the daily net injection decreased gradually [8] - **Sino - US Market Interest Rate Comparison**: The inversion of the Sino - US bond yield spread slightly decreased. The US 6 - month SOFR rate rose from 4.20% on July 28th to 4.24% on August 1st; the Chinese 6 - month SHIBOR rate remained stable at 1.61%. As of August 1st, the 6 - month interest rate spread between China and the US was - 263BP, with a slightly wider inversion; the 2 - year and 10 - year bond yield spreads were - 227BP and - 252BP respectively, with a slight reduction in the long - and short - term spreads [13] - **Term Spreads**: The term spread of Chinese bonds slightly contracted, while that of US bonds slightly expanded. The 2 - year Chinese bond yield was 1.43%, and the 10 - year was 1.71%, with the 10 - 2 year spread narrowing from 30BP to 28BP. The US bond yield slightly declined, with the 2 - year yield rising to 3.94% and then dropping 25BP to 3.69% on August 1st, and the 10 - year yield dropping 19BP to 4.23%. The 10 - 2 year term spread of US bonds widened 3BP to 54BP [16] - **Interest Rate Term Structure**: The yield curve of Chinese bonds steepened, while that of US bonds flattened and shifted downward. The overall change in the Chinese bond yield curve was small, with the 3 - month yield dropping 2BP and the 3 - 5 year yields dropping about 1 - 2BP. Except for the 3 - month yield, the overall US bond yields dropped about 20BP [16] 3.2 Key Bond Market Events Last Week - **New Policy on Bond Interest Taxation**: On August 1st, the Ministry of Finance and the State Taxation Administration announced that starting from August 8th, the interest income from newly issued national bonds, local government bonds, and financial bonds will be subject to VAT. The interest income from bonds issued before August 8th and the continued issuance after that date will remain VAT - exempt until maturity [23][24] - **Weak PMI Data**: The National Bureau of Statistics data showed that the manufacturing PMI in July was 49.3%, a 0.4 - percentage - point decrease from the previous month, indicating a decline in manufacturing prosperity. In July, the manufacturing industry entered the traditional off - season, and factors such as high temperatures and floods in some areas led to the decline of PMI data [24]