Group 1: Credit and Financing Trends - Recent months have seen weak credit performance from both enterprises and households, with October's new social financing (社融) at 815 billion yuan, a year-on-year decrease of 597 billion yuan, marking the third consecutive month of decline[6] - The social financing stock growth rate fell from 8.7% to 8.5%[8] - Government bond financing in October was 489.3 billion yuan, a year-on-year decrease of 560.2 billion yuan, indicating a continued weakening of government bond support[12] Group 2: Monetary Indicators - M1 growth rate fell to 6.2% in October, ending a five-month upward trend, while M2 decreased by 0.2 percentage points to 8.2%[19] - The weighted average interest rate for new personal housing loans decreased by only 3 basis points to 3.06% as of the end of September[21] - The People's Bank of China has shifted focus from loan quantity targets to the quality and structure of loans, emphasizing the use of social financing and monetary indicators to gauge policy effectiveness[21] Group 3: Future Outlook - The urgency for incremental stimulus is expected to decrease as the focus shifts to the implementation and effects of existing policies, with potential for further monetary easing in the coming year[21] - The Ministry of Finance announced the allocation of 500 billion yuan from local government debt limits to support social financing in the last two months of the year[6]

Core Viewpoints - The People's Bank of China (PBOC) indicates that a slight decline in loan growth is reasonable, reflecting changes in the financial supply side structure, with M2 growth potentially peaking at 8.8% in August and expected to decline to 8.0% in the fourth quarter [3][6][12] - The probability of short-term reserve requirement ratio (RRR) cuts or interest rate reductions remains low, as the current financial dilemma is attributed to a lack of borrowers rather than lenders, suggesting that any released funds may not effectively stimulate the real economy [3][8][18] Summary by Sections Monetary Aggregate Guidance - The PBOC notes that with the rapid development of financial markets, the structure of social financing has changed significantly, leading to a natural decline in total financial growth rates [5][11] - Loan growth has shifted towards supply-side financing rather than demand-side, which may help improve supply-demand balance despite impacting M2 growth [5][11] - M2 growth has increased from 7.3% in December 2024 to 8.4% in September 2025, but is expected to decline to 8.0% in the fourth quarter [6][12] Monetary Policy Guidance - The PBOC emphasizes the need for an appropriately loose monetary policy, which is characterized by ample liquidity and the use of various tools to maintain relatively loose financing conditions [7][16] - The increase in excess reserves does not necessarily lead to improved total liquidity, as the effectiveness of monetary creation is influenced by the demand for financing in the real economy [17] - The absence of the phrase "preventing fund circulation" in the latest report suggests a more favorable view of the short-term bond market [17][18]

Core Insights - The report predicts that the old-caliber M1 year-on-year growth will decline from 6.2% in September to approximately 3.4% by the end of the year, while M2 is expected to decrease from 8.4% in September to around 8.0% by year-end [1][10] - The analysis framework for M1 and M2 growth is based on the formula: old-caliber M1 = M2 - other currencies, where M2 is derived from various leverage factors across different sectors [4][14] M1 and M2 Growth Analysis - The report outlines five key factors influencing M2 growth: corporate leverage, household leverage, foreign exchange derivation, government leverage, and other factors, with a projected M2 year-on-year decline of 900 billion [6][20] - The anticipated decline in M1 growth is attributed to a combination of factors, including a decrease in corporate loans by 300 billion and a reduction in household deposits by 6200 billion [7][33] - Historical data indicates that changes in M1 correlate with shifts in PPI and industrial inventory levels, suggesting that M1 serves as a leading indicator for these economic metrics [2][13] Investment Themes - The report emphasizes the importance of understanding the dynamics of M1 and M2 in relation to asset allocation, highlighting that M1's growth is closely tied to the performance of equity markets and corporate profitability [9][33] - The analysis suggests that a stable equity market environment could lead to a shift in household deposits towards investment assets, thereby impacting M1 growth positively [34][40] Future Projections - The report forecasts that M1 growth will be approximately 2.3 trillion, with M2 growth around 25 trillion, reflecting a broader economic context where monetary policy and market conditions play crucial roles [51][53] - The anticipated government bond issuance is expected to decrease, which may further influence M2 growth dynamics in the upcoming quarters [27][30]

Report Industry Investment Rating No information provided. Core Viewpoints - The overall capital situation is loose, and with the central bank's 1.4 - trillion repurchase, the bond yields decline. The bond market will continue the short - term volatile pattern, and maintain the bull - market foundation in the medium and long term supported by the weak economic recovery and loose policies. However, attention should be paid to the fluctuations caused by macro data and overseas negotiation progress and the necessity of adjusting the duration [2]. - For the 2509 contract, it is neutral as the repurchase rate rebounds and the bond futures prices fluctuate. Attention should be paid to the widening of the basis. Short - sellers can use far - month contracts for appropriate hedging due to the medium - term adjustment pressure [3]. Summary by Directory 1. Interest Rate Pricing Tracking Indicators - Price indicators: China's CPI (monthly) has a month - on - month change of - 0.10% and a year - on - year change of 0.10%; China's PPI (monthly) has a month - on - month change of - 0.40% and a year - on - year change of - 3.60% [8]. - Economic indicators (monthly update): The social financing scale is 430.22 trillion yuan, with a month - on - month increase of 4.06 trillion yuan and a growth rate of 0.95%; M2 year - on - year is 8.30%, with an increase of 0.40% and a growth rate of 5.06%; the manufacturing PMI is 49.70%, with an increase of 0.20% and a growth rate of 0.40% [8]. - Economic indicators (daily update): The US dollar index is 98.64, with an increase of 0.53 and a growth rate of 0.54%; the offshore US dollar - to - RMB exchange rate is 7.1751, with an increase of 0.005 and a growth rate of 0.07%; SHIBOR 7 - day is 1.55, with an increase of 0.03 and a growth rate of 2.05%; DR007 is 1.57, with an increase of 0.03 and a growth rate of 2.19%; R007 is 1.68, with an increase of 0.04 and a growth rate of 2.35%; the 3 - month inter - bank certificate of deposit (AAA) is 1.56, with a decrease of 0.02 and a decline rate of 1.06%; the AA - AAA credit spread (1Y) is 0.06, with an increase of 0.00 and a decline rate of 1.06% [9]. 2. Overview of the Treasury Bond and Treasury Bond Futures Market - Multiple charts show the closing price trend, price change rate, maturity yield trend, valuation change, precipitation funds trend, position ratio, net position ratio (top 20), long - short position ratio (top 20), trading - to - position ratio, bond lending turnover and total position of treasury bond futures, as well as the spread between national development bonds and treasury bonds and the treasury bond issuance situation [6][7]. 3. Overview of the Money Market Capital Situation - Multiple charts show the interest rate corridor, central bank open - market operations, Shibor interest rate trend, inter - bank certificate of deposit (AAA) maturity yield trend, inter - bank pledged repurchase transaction statistics, and local bond issuance situation [31][33][36]. 4. Spread Overview - Multiple charts show the inter - term spread trend of treasury bond futures and the term spread of spot bonds and cross - variety spread of futures [40][43][44]. 5. Two - Year Treasury Bond Futures - Multiple charts show the implied interest rate and treasury bond maturity yield, IRR and capital interest rate, and the three - year basis and net basis trends of the TS main contract [46][48][55]. 6. Five - Year Treasury Bond Futures - Multiple charts show the implied interest rate and treasury bond maturity yield, IRR and capital interest rate, and the three - year basis trends of the TF main contract [54][57]. 7. Ten - Year Treasury Bond Futures - Multiple charts show the implied interest rate and treasury bond maturity yield, IRR and capital interest rate, and the three - year basis and net basis trends of the T main contract [62][65]. 8. Thirty - Year Treasury Bond Futures - Multiple charts show the implied interest rate and treasury bond maturity yield, IRR and capital interest rate, and the three - year basis and net basis trends of the TL main contract [70][73][76].