Macroeconomic Insights - US inflation remains moderate, with December CPI year-on-year growth at 2.7%, unchanged from November, and month-on-month growth at 0.3%, also stable since September. Core CPI year-on-year growth is at 2.6%, slightly below the expected 2.7% [1] - The structure of inflation shows weakness in goods and strength in services. Core goods month-on-month growth is 0%, primarily dragged down by used cars. Even excluding used cars, core goods growth remains low, while core services show a general month-on-month rebound [1] Short-term Inflation Outlook - Despite lower-than-expected inflation data, the market does not anticipate an early rate cut by the Federal Reserve, with expectations for the first rate cut still set for June 2026. Food inflation is expected to cool gradually, while used car prices may see marginal rebounds, and rent remains stable [2] Financial Engineering Strategies - The quantitative model signals a recommendation to overweight small-cap stocks in January, with a model signal of 0.17 indicating a preference for small caps. The model's return as of the end of December is 27.56%, outperforming the equal-weight benchmark by 0.71% [4] - For value and growth styles, the model signal is neutral, suggesting an equal-weight allocation between the two styles. The model's return is 22.72%, with an excess return of 1.93% over the benchmark [4] Fixed Income Insights - Concerns about long-term bond supply do not necessarily imply a tightening of interbank liquidity. The central bank's support is expected to keep liquidity stable, with funding rates likely remaining low in the first quarter of 2026 [10] - The central bank's ability to smooth out funding fluctuations has improved, with a flexible approach to liquidity management anticipated. If necessary, measures such as large-scale MLF injections or reserve requirement ratio cuts may be employed [12]

Core Viewpoint - The article discusses the outlook for interbank funding and bond supply in the first quarter of 2026, emphasizing that concerns over long-term bond supply do not contradict the continuation of loose funding conditions, with the central bank likely maintaining low interest rates [1][2][3]. Group 1: Funding Conditions - The continuation of loose funding conditions and concerns over long-term bond supply are not contradictory; the current issue is not a lack of liquidity but rather insufficient demand for long-term bonds from institutions [1]. - The central bank's willingness to support interbank funding is crucial; despite seasonal factors and government bond issuance, the central bank's ability to smooth funding fluctuations is expected to remain strong [2][3]. Group 2: Monetary Policy Framework - Since the second half of 2024, the central bank has been iterating its monetary policy framework to enhance liquidity management, which is expected to lead to a stable and relatively loose funding environment in early 2026 [3]. - The central bank may employ various tools, such as large-scale MLF operations or adjustments in reserve requirements, to manage liquidity effectively [3]. Group 3: Deposit Rates and Market Reactions - The article predicts that the central bank's actions will lead to a decline in deposit rates, with a significant portion of fixed-term deposits maturing in the first quarter of 2026, which could further lower rates [3]. - The one-year deposit rate is expected to stabilize around 1.60-1.65%, with a downward trend anticipated as favorable factors emerge [3].

Market Overview - The A-share market experienced a slight rebound this week, but the average daily trading volume continued to decline, with the Shanghai Composite Index still not recovering from the gap created on November 21 [1] - The performance of various sectors showed that non-ferrous metals, communications, and defense industries led the gains, while media, real estate, and beauty care sectors faced declines [1] - The national bond market saw a downward trend, with government bonds performing worse than credit bonds, and long-term bonds significantly weakened [1] Stock Market Insights - Despite the market's recent uptick, trading volumes remain low, and indices are still within a consolidation range. The current market sentiment is cautious, with a preference for long-term trend stocks and a strategy of buying on dips [4] - The market is expected to maintain a consolidation phase as stronger industry catalysts are needed to drive significant upward movement [4] Bond Market Analysis - Short-term bearish sentiment prevails in the bond market, with a focus on short-term yield strategies. The macro environment of low interest rates is likely to persist, and inflation remains a key variable to monitor [5] - The bond market is anticipated to experience increased volatility and reduced yield space in the future [5] Commodity Market Trends - Gold is currently in a consolidation phase, with a strategy of "buying on dips" recommended within the current trading range. Attention should be paid to policy signals from the upcoming Federal Reserve meeting and inflation data [6] - The commodity market saw the South China Commodity Index rise by 0.97%, with notable increases in precious metals and non-ferrous commodities [34] Overseas Market Developments - The U.S. stock market showed positive earnings reports, with the S&P 500 exceeding revenue expectations by approximately 2%. The AI industry trend remains strong, and the Federal Reserve is still in a rate-cutting cycle, indicating no significant risks for U.S. equities [7] - Investors are encouraged to consider diversified overseas investments through QDII funds, as daily subscription limits continue to decrease [7]