Group 1 - The net purchase of foreign bonds by Japan for the week of May 30 was -118 billion yen, indicating a significant outflow compared to the previous value of 92 billion yen [1]

Core Viewpoint - The recent fluctuations in global bond yields indicate a shift in investor sentiment towards requiring higher risk premiums for holding long-term bonds, suggesting a return to historical norms [2][4][7]. Group 1: Market Reactions - The U.S. stock market rose nearly 2% last week, driven by gains in technology stocks [3]. - A U.S. trade court initially blocked most new tariffs, boosting the stock market, but a federal appeals court later allowed the tariffs to remain in effect pending a final decision [1][4]. Group 2: Bond Market Dynamics - The U.S. 10-year Treasury yield decreased slightly to 4.40%, yet remains 50 basis points higher than the low in April [1][3]. - Since April, there has been a significant rise in long-term bond yields, reflecting a normalization of global term premiums [4][7]. - Concerns over rising U.S. deficits are prompting a continued reduction in long-term U.S. Treasury holdings, with a preference for Eurozone bonds instead [8][9]. Group 3: Economic Indicators - Upcoming U.S. employment data is expected to provide insights into the labor market's condition [4]. - The European Central Bank is planning interest rate cuts while monitoring the impact of tariffs on the economy [4]. Group 4: Investment Strategies - The company maintains a bearish stance on U.S. long-term Treasuries due to rising deficit concerns and sticky inflation [8]. - There is a preference for short-term government bonds and European credit over U.S. bonds, attributed to lower valuations and reduced correlation with U.S. Treasury movements [9]. - Infrastructure stocks and private credit are viewed as attractive opportunities due to relative valuations and potential returns as banks withdraw from lending [13].

Group 1 - The U.S. bond market is experiencing an unprecedented crisis of confidence, with the 30-year Treasury yield surpassing 5%, nearing the highest level since the 2007 financial crisis [1] - Concerns about the long-term fiscal situation of the U.S. are deepening, as the total federal debt has exceeded $36 trillion, with a debt-to-GDP ratio over 124%, significantly above international warning levels [1] - Interest payments on the debt are projected to exceed $1 trillion in the fiscal year 2024, becoming the third-largest government expenditure, surpassing defense spending [1] Group 2 - Major Wall Street investment firms are shifting to risk-averse strategies, systematically avoiding 30-year U.S. Treasury bonds and reallocating funds to mid-term bonds (5 to 10 years) [3] - These mid-term bonds offer relatively attractive returns while effectively reducing interest rate risk exposure, as firms like Pacific Investment Management Company adopt similar defensive strategies [3] - This collective adjustment in investment portfolios has yielded positive risk control outcomes this year, with investors seeking higher risk compensation for long-term lending to the U.S. government in the current fiscal environment [3] Group 3 - The U.S. Treasury yield curve is exhibiting a rare steepening trend, with the 30-year yield rising significantly while short-term yields (2-year, 5-year) are declining [4] - The difference between the 30-year and 5-year yields has surpassed 100 basis points for the first time since 2021, indicating substantial selling pressure on long-term bonds [4] - Recent bond auctions from major economies, including the U.S. and Japan, have faced weak demand, raising concerns about the future demand for long-term government bonds [4]

施罗德投资固定收益投资总监吴美燕称，近期美债利率剧烈波动，引起投资者担忧。但她表示，对长期 投资者而言，短期市场的剧烈抛售行为，往往蕴藏布局机会。观察过去一年的债市表现，信用利差处于 相对低点，价值空间受限。近期随市场情势变化，信用利差扩大，债市即展现出吸引力，适合中长期布 局。 施罗德投资强调，过去一段时间，美国股债市场皆表现良好。然而，现阶段反而要积极通过地区及债券 品种的分散，才可有效降低投组波动，并且掌握长线债券投资机会。 施罗德指，在分散策略方面，暂时不便过分着墨于新兴市场，因其波动性较高，容易造成额外不安；相 反，欧洲与英国等成熟市场因其能够提供较为稳定的债券投资机会，也有降息带来债券价格上扬的可能 性，或可成为首选。 值得注意的是，当前有些投资者期望以现金或者黄金作为避险的选择。施罗德表示，市场的恐慌情绪固 然会让现金以及黄金具备短线吸引力，但这两项资产并不具备息收能力，黄金也存在价格波动风险。对 长期投资者来说，债券具有价格以及收息优势，才是真正具备核心资产配置特性的品种。整体而言，当 前虽然市场风险尚未完全消除，但在价格修正与价值显现的交会点上，既是危机也是转机，同时也是债 市中长期投资进场 ...

Group 1: Report Industry Investment Rating - The report does not explicitly provide an industry investment rating. Group 2: Core Views of the Report - The progress of China - US tariff negotiations exceeded expectations, with US tariffs on China significantly reduced. The 24% tariff will be suspended for the initial 90 days, 10% will be retained, and the remaining additional tariffs will be cancelled, equivalent to a 115 - percentage - point reduction (24% suspended for 90 days). There is a possibility that the 20% fentanyl tariff will be further reduced [2]. - China's export resilience exceeded expectations. In April, despite a 20% drop in exports to the US, total export volume increased by 9.3% year - on - year, reflecting strong industrial competitiveness. The report predicts that China's economy will stabilize internally in 2025 [2]. - After the significant tariff reduction, the money market is expected to gradually tighten. The DR001 weighted average interest rate is expected to rise to around 1.7% in the next month, and the 1Y national - share inter - bank certificate of deposit rate will reach 1.8%. If the 20% fentanyl tariff is also reduced to 0, the DR001 weighted average interest rate may further rise to around 1.8% [2]. - It is recommended to consider allocating 10Y Treasury bonds at 1.8% and 30Y Treasury bonds at around 2.1%. It is expected that there will be no trend - based opportunities in pure - bond investment in the next two years. For 5Y national - share secondary capital bonds, it is advisable to wait until the yield is above 2.1% [2]. - With the implementation of reserve requirement ratio cuts and interest rate cuts, the positive factors for the bond market may have been exhausted. The report recommends a full - scale defensive strategy for the bond market and suggests paying more attention to stocks and convertible bonds in 2025 [2]. Group 3: Summary by Related Content China - US Tariff Negotiation Progress - On May 11, the US and China reached a trade agreement, and on May 12, the "Joint Statement of the China - US Geneva Economic and Trade Talks" was released, with significant tariff reductions [2]. China's Economic Situation - In April, China's total export volume increased by 9.3% year - on - year despite a 20% drop in exports to the US, indicating strong industrial competitiveness. Domestic consumption is steadily recovering, the real estate market is gradually stabilizing, and the stock market is slowly rising [2]. Capital Market and Bond Market Outlook - After the tariff reduction, the money market is expected to tighten. The DR001 weighted average interest rate and 1Y national - share inter - bank certificate of deposit rate are expected to rise. The report advises waiting for appropriate yields when investing in Treasury bonds and secondary capital bonds and adopting a defensive strategy for the bond market [2].

Core Viewpoint - The case of Shanxi Construction Investment triggering the "accelerated maturity" clause for early bond repayment at face value rather than market value has harmed secondary market investors, reflecting a new trend of local government financing vehicles exploiting clause loopholes to reduce debt burdens under fiscal pressure [1] Group 1: Event Analysis - The event highlights the increasing risk of default due to continuous non-payment from local governments in PPP projects, revealing the heightened repayment risk under local fiscal constraints [1] - The design of accelerated maturity clauses in existing credit bonds shows multiple ambiguities, transforming from a protective tool for investors to a means of protection for issuers [1] Group 2: Investment Implications - Investors in local government bonds must assess the financial feasibility behind bond clauses, focusing on the real return rates of project-backed bonds and the sustainability of financial burdens for pure credit bonds [1] - Even without traditional defaults, investors in local government bonds face hidden risks of reduced returns, suggesting a cautious approach in the current market with a focus on 1-5 year credit bonds and opportunities in bonds with implied ratings of AA and above [1]

Core Viewpoint - Investors who held Argentine bonds are now reaping significant rewards, as the value of these bonds has surpassed their initial principal, outperforming "safe" U.S. Treasury investments [2][4]. Group 1: Investment Performance - The turnaround in Argentine bonds is attributed to President Javier Milei's extensive reforms of the bloated national institutions while maintaining popularity [3]. - The high yields from these bonds have compensated for a 25% drop in bond prices, leading to over 50% returns when reinvesting the coupon payments [4]. - In contrast, U.S. 30-year Treasury bonds have seen a loss of approximately 10% during the same period [4]. Group 2: Lessons from Investment - The experience with Argentine bonds highlights three key lessons: high-risk investments can yield substantial returns, hidden risks persist even when they are not immediately apparent, and political changes can be unpredictable [5]. - Argentina's history of defaults, having defaulted nine times since its independence in 1816, underscores the evident risks associated with its bonds [6]. - High-risk borrowers can still attract investment if they offer sufficiently high interest rates, as evidenced by academic research showing that high-risk country bonds often yield higher long-term returns than safer assets [7][8]. Group 3: Market Dynamics and Risks - Investors must be prepared for significant losses on specific bonds, similar to individual stocks, with Argentine bonds experiencing a 75% price drop at one point [9]. - Diversifying across multiple high-yield assets and holding them long-term can mitigate risks despite high volatility [10]. - Hidden risks, such as those seen in Greece before the 2007 financial crisis, can lead to severe consequences when market conditions shift unexpectedly [11][12]. Group 4: Political and Governance Factors - Political dynamics pose significant challenges for investors, as seen with Milei's unexpected success in implementing austerity measures during an economic downturn [14]. - Argentina may soon regain market access, which could change the investment landscape significantly [15]. - Investors should be wary of governance quality, enforcement issues, and fiscal capacity when considering sovereign debt investments [16].