Core Viewpoint - The U.S. Treasury Secretary, Becerra, stated that even with the nomination of Kevin Warsh as the Federal Reserve Chair, there will not be a rapid reduction in the Fed's balance sheet, indicating a potential year-long deliberation on adjustments [1]. Group 1: Federal Reserve's Balance Sheet Management - Becerra emphasized that the decision on how to adjust the balance sheet will be made independently by the Federal Reserve, suggesting that if they adopt a "sufficient reserves" policy, immediate action is unlikely [1]. - The Federal Reserve restarted its balance sheet expansion in December by purchasing short-term Treasury securities to manage market liquidity and maintain control over interest rate targets [1]. - Goldman Sachs noted that the market may misinterpret Warsh's actual stance, as the Fed under his leadership is expected to retain options for rate cuts and quantitative easing without significantly reducing the balance sheet [1]. Group 2: Proposed Changes to Federal Reserve-Treasury Relationship - Warsh has long advocated for a new version of the 1951 Federal Reserve-Treasury Agreement to redefine the relationship between the two institutions, which could clarify the Fed's balance sheet size in relation to Treasury issuance plans [2]. - If significant changes to the Fed's asset portfolio occur, it could lead to volatility in the $30 trillion U.S. Treasury market and raise concerns about the Fed's independence [2]. - Market expectations suggest that if the agreement is implemented, the Fed's holdings may shift from long-term securities to short-term Treasury bills, with predictions indicating that the Fed could become a significant buyer of Treasury bills over the next five to seven years, increasing its holdings from less than 5% to 55% [2].

Report Summary 1) Report Industry Investment Rating No information provided. 2) Core Views - For building materials, the view is that they will run in a range - bound consolidation, with the price center of gravity moving down and running weakly, and attention should be paid to macro - policies and downstream demand [3]. - For aluminum ingots, it is expected that the price will be strongly volatile in the short - term, gradually transition to the off - season, and attention should be paid to macro - sentiment, macro - expectation changes, geopolitical crisis development, mine - end resumption, and consumption release [1][4]. 3) Summary by Related Content Building Materials - Yunnan and Guizhou short - process building steel producers will have a shutdown and maintenance period during the Spring Festival from mid - January, with a resumption around the 11th to 16th day of the first lunar month, affecting a total output of 741,000 tons. In Anhui, 1 out of 6 short - process steel mills has stopped production on January 5, and most others will stop around mid - January, with a daily output impact of about 16,200 tons [2][3]. - From December 30, 2024, to January 5, 2025, the total transaction area of newly - built commercial housing in 10 key cities was 2.234 million square meters, a 40.3% decrease from the previous period and a 43.2% increase year - on - year [3]. - Building materials continued to decline yesterday, reaching a new low. In the context of weak supply and demand, market sentiment is pessimistic, and winter storage is sluggish, providing little price support [3]. Aluminum - As of October 27, the SMM imported bauxite index was $73.16 per ton, down $0.4 from the previous day due to high imported ore inventory. Domestic bauxite supply is tight, but price increases are limited due to falling alumina prices and high absolute inventory [3]. - Last week, the operating rate of domestic aluminum downstream processing leading enterprises was flat at 62.4% week - on - week, down 0.1% from the previous week. Different sectors showed different trends: the operating rate of aluminum sheet and strip decreased by 1 percentage point to 67.0%, aluminum cable increased by 0.4% to 64.4%, aluminum profile increased slightly to 53.7%, aluminum foil decreased by 0.4 percentage points to 71.9%, and recycled aluminum remained at 58.6% [3]. - As of October 27, the inventory of electrolytic aluminum ingots in domestic mainstream consumption areas was 626,000 tons, an increase of 8,000 tons from last Thursday and 1,000 tons from last Monday [3]. - Macro overseas interference affects market sentiment. The short - term fundamentals are stable, and it is expected that the price will remain high and volatile. Pay attention to the inventory - consumption trend [4].

Core Viewpoint - The leader of the minor opposition party in Japan criticizes the Bank of Japan's quantitative tightening plan, urging a focus on boosting domestic demand and revitalizing the economy [1] Group 1: Economic Policy Critique - The leader expresses concern that reducing the amount of bonds accepted by the Bank of Japan could complicate the issuance of government bonds and severely restrict economic policy [1] - The statement highlights potential political challenges the Bank of Japan may face regarding interest rate hikes and gradual bond purchase reductions [1] Group 2: Political Context - The opposition party, established in 2020, is a small populist party with only five seats in the National Diet, but its support has increased ahead of the upcoming Senate elections on July 20 [1] - There is growing interest in whether the party's election results could influence the policies of the ruling coalition [1]

Core Viewpoint - The Japanese ultra-long-term bond market is experiencing significant turmoil, with yields reaching historical highs due to concerns over central bank policies and fiscal issues [1] Group 1: Market Dynamics - The liquidity and demand for ultra-long-term bonds have decreased, leading to rising yields [1] - Some market participants are urging the Bank of Japan to increase its purchases of ultra-long-term bonds or halt its bond reduction plan amid the current market collapse [1] - There is a consensus that slowing down the bond reduction could alleviate market pressures, especially as debt issues gain more attention [1] Group 2: Fiscal Concerns - The Japanese Prime Minister's statement that the country's fiscal situation is "worse than Greece" has intensified market fears [1] - The volatility in the bond market may trigger a chain reaction that could impact global markets, as it may lead Japanese investors to withdraw funds back to Japan [1] Group 3: Future Outlook - The Bank of Japan is set to review its quantitative tightening plan during its next policy meeting on June 16-17 [1] - Any signs of intervention or changes in the bond reduction plan from the central bank could exert pressure on the yen exchange rate [1]