1. Report Industry Investment Rating - The report maintains an optimistic attitude towards the bond market, suggesting investors retain corresponding positions and durations, with a recommended combination of 3-year policy financial bonds + 10-year treasury bonds, and an increase in holdings of 3 - 5-year credit bonds and perpetual bonds [3][60] 2. Core Viewpoints - The central bank has adjusted its monetary policy operating target to DR001, and the current funds have not reached the lower limit of the new model. Considering the central bank's goal of reducing costs, there is a possibility of seeing DR001 between 1.2% - 1.3% in the future, and the central bank's recent large - scale reverse repurchase operations have released a signal to stabilize liquidity [2][22] - The pressure of export decline may become more prominent after July. The economic data in May was still weak, with low credit growth, high fiscal deposits, and continued negative growth in CPI and PPI. The inflation - low state may persist for some time [2][3] - The short - end of the bond market needs time to price in the loose funds. Although the short - end interest rate has not responded significantly to the current loose funds, if the funds remain loose, the short - end and long - end interest rates still have room to decline [3][56] 3. Summary by Directory 3.1 Monetary Policy's Operating Target Adjusted to DR001, Current Funds Not at New Model's Lower Limit - Historically, the central bank used DR007 as the operating target, but due to the influence of non - bank behavior on the supply and demand of 7 - day funds, it was difficult to balance the control of DR007 and overnight interest rates. Since 2023, the deviation of DR007 from the policy rate has increased, while the deviation of DR001 has narrowed [8][9] - In 2024, the central bank created temporary overnight repurchase and reverse repurchase tools, indicating a more explicit rule for overnight interest rate control. In 2025 Q1, the quarterly monetary policy report also replaced DR007 with DR001 and its upper and lower limits [16][22] - As of June, the lowest value of DR001 has dropped to 1.36%, but the lower limit of 1.2% has not been reached. The central bank's recent 4000 - billion 6 - month reverse repurchase operations released a signal to stabilize liquidity, and there is a possibility of further decline in the funds' interest rate center [2][22] 3.2 Export Decline Pressure May Intensify after July, May's Credit Remained Weak, and Government Deposits Were Not Released - The May export growth rate dropped from 8.1% in April to 4.8%. The impact of "grabbing exports" was not obvious. Although it may boost June's data, the recent container freight volume growth was moderate, and the decline pressure of exports may intensify after July [27][29] - In May, the new social financing increment was 2.29 trillion, and the stock growth rate remained at 8.7%. The new credit was 620 billion, lower than expected. The decline in bill financing was the main reason for the under - expectation of credit, and the entity's financing demand was not active [32][35] - In May, fiscal deposits increased by 880 billion, significantly higher than expected, possibly due to the slow progress of fiscal expenditure and the use of special refinancing bonds, or the non - expenditure of the special treasury bonds. The inflation data remained in negative growth, and the economic heat showed no significant improvement [36][41] 3.3 Short - End Needs Time to Price in Loose Funds, Temporarily Hold Positions and Durations - Recently, ultra - long bonds have performed strongly, which may be due to traders' strong sentiment towards the bond market. Whether the market is at the end of the rally depends on whether the short - end space can be opened [53] - Although the current funds are loose, the short - end interest rate has not responded significantly. The central bank's new operating target of DR001 indicates that there is still room for the overnight interest rate to decline, and the policy rate may be adjusted in Q3 [56] - If the funds remain loose, the short - end interest rate has room to decline. Considering the possible decline in the expected yield of wealth management products and insurance rates in the second half of the year, it is recommended to hold a combination of 3 - year policy financial bonds + 10 - year treasury bonds and increase holdings of 3 - 5 - year credit bonds and perpetual bonds [60]