Core Viewpoint - The article discusses the current financial landscape, highlighting a tight funding environment, a slight decline in long-term bond yields, and the impact of central bank actions on the stock and bond markets [2][4]. Group 1: Monetary Policy and Market Reactions - The central bank conducted a net injection of 3,457 billion yuan through reverse repos, with a total of 5,803 billion yuan in 7-day reverse repos initiated [2][4]. - The funding rates showed an upward trend due to a tight funding environment, with DR001 around 1.47% and DR007 at approximately 1.55% [2][4]. - The stock market experienced slight declines amidst these monetary policy adjustments, reflecting a "stock-bond seesaw" effect [4]. Group 2: Economic Indicators - The youth unemployment rate reached 17.8% in July, the highest in 11 months, compared to 14.5% in June, indicating growing economic challenges for younger demographics [4]. - The article notes that while housing prices are at new lows and consumer prices are low, the stock market is at new highs, suggesting a complex economic environment [4]. Group 3: Bond Market Performance - The bond market showed cautious sentiment, with the 10-year government bond yield peaking at 1.783% before retreating to around 1.766% [4]. - The article highlights a specific bond (250210) with a high borrowing concentration of 44%, making it susceptible to being "squeezed" in the market [4].

Core Viewpoint - The equity market has shown significant growth, with the Shanghai Composite Index achieving an 8-day winning streak, while the bond market has also performed well, indicating a new trend of "dual bull" in both markets [1][2][4]. Group 1: Equity Market Performance - The stock market experienced a strong upward trend, with the Shanghai Composite Index surpassing the high point from October 8 of the previous year, reaching a nearly 4-year high [2]. - The total trading volume in the Shanghai and Shenzhen markets reached 2.15 trillion yuan, marking a return to above 2 trillion yuan after 114 trading days [2]. Group 2: Bond Market Performance - The bond market saw a comprehensive increase in government bond futures, with the 30-year main contract rising by 0.10% to 118.270 yuan, and the 10-year main contract increasing by 0.02% to 108.435 yuan [2]. - Major interest rate bonds in the interbank market experienced a decline in yields, with the 10-year government bond yield falling by 0.75 basis points to 1.72% [2]. Group 3: Market Dynamics and Future Outlook - Analysts suggest that the market is becoming desensitized to the "stock-bond seesaw" effect, indicating a potential return to fundamental factors driving both equity and bond markets [4][6]. - Future expectations indicate that the 10-year government bond yield may stabilize around 1.65%-1.70% as new bonds are issued, leading to a revaluation of interest rate bonds [4]. - The outlook for the second half of the year suggests a "dual bull" market, with equity investments focusing on structural opportunities in the new economy, while the bond market is characterized by a low-growth, low-inflation, and low-interest-rate environment [6].

Core Viewpoint - The article discusses the current state of the bond market, highlighting the impact of tax policy changes on bond yields and market sentiment, particularly in response to the recent announcement of reinstating value-added tax on government bond interest income [3][5]. Group 1: Market Conditions - The bond market experienced a "roller coaster" effect due to the sudden announcement of reinstating value-added tax on government bond interest, leading to fluctuations in yields [5]. - The 10-year government bond yield initially rose by 1 basis point before dropping by 2 basis points, reflecting market reactions to the tax news [5]. - The overall sentiment in the bond market was slightly weak, with the 10-year government bond yield closing at 1.6975% after a brief rise [5]. Group 2: Economic Indicators - The S&P Global Manufacturing PMI for July was reported at 49.5, below expectations and the previous value of 50.4, indicating a contraction in manufacturing activity [5]. - The stock market and commodity performance were also weak, contributing to a cautious market environment [5]. Group 3: Monetary Policy and Liquidity - The central bank conducted a 7-day reverse repurchase operation of 126 billion yuan, with a net withdrawal of 66.33 billion yuan due to maturing reverse repos [3]. - The funding rates showed a notable decline, with DR001 around 1.31% and DR007 at approximately 1.42%, indicating a balanced and slightly loose liquidity environment [3].

Core Viewpoint - The bond market rebounded on July 15, driven by a series of significant economic data released by the National Bureau of Statistics, indicating resilience in the domestic economy and supporting the likelihood of achieving the annual GDP growth target of 5% [1][2]. Economic Data Summary - The GDP growth rate for the first half of the year was reported at 5.3%, exceeding market expectations [1]. - Industrial added value in June increased by 6.8% year-on-year, up from a previous value of 5.8% [1]. - Retail sales of consumer goods in June totaled 42,287 billion yuan, with a year-on-year growth of 4.8%, down from 6.4% previously [1]. - Fixed asset investment (excluding rural households) grew by 2.8% year-on-year in the first half, compared to a previous growth of 3.7% [1]. Market Reaction - The bond market saw a significant increase, with the 30-year government bond futures rising by 0.53%, marking the largest increase since May 30 [1]. - By the end of the trading day, all government bond futures closed higher, with the 30-year main contract up 0.47% to 120.760 yuan, and the 10-year main contract up 0.18% to 108.890 yuan [2]. - The yields on major interbank bonds mostly declined, with the 10-year government bond yield falling by 1.06 basis points to 1.656% [2]. Trading Behavior - The primary buyers in the bond market on July 15 were banking institutions, while brokers and funds were the main sellers [4]. Future Outlook - Southwest Securities indicated that traditional seasonal factors affecting the bond market in the third quarter may have limited impact in 2025, with overall market sentiment remaining active [5]. - Analysts noted that despite recent adjustments in the bond market, key variables influencing bond direction, such as fundamentals and central bank attitudes, have not changed [5].

Group 1 - The report indicates that the bond market is currently experiencing adjustments due to a self-correction of excessive risk appetite, with significant fluctuations observed from July 9 to 11, where daily adjustments exceeded 1 basis point [1][22][25] - Despite the frequent negative rotations in the bond market, key variables influencing the market direction, such as fundamentals, central bank attitudes, and external circulation pressures, have not changed [1][25][37] - The report highlights that the bond market's pricing reference may shift from the stock market to fundamentals as economic data is released, indicating a weak correlation between stock market rebounds and bond market pricing [3][36] Group 2 - The report notes that the recent adjustments in the bond market have led to the 10-year and 30-year government bonds returning to relatively high positions at 1.65% and 1.85%, respectively, making the market more sensitive to positive news and less responsive to negative news [4][37] - It emphasizes that the liquidity situation will be a critical observation period for the central bank's attitude, especially with a significant funding gap expected in mid-July [4][26][39] - The report suggests that despite recent increases in funding prices, overnight rates remain relatively low, indicating that leverage strategies may still be preferred in July [6][39][40] Group 3 - The report discusses the impact of recent adjustments in the bond market, where the duration of bond funds has decreased, reflecting a shift in market behavior as institutions reduce their duration amid tightening liquidity [6][24][25] - It also mentions that the government bond issuance volume remains above 400 billion, indicating ongoing government financing activities [6][21] - The report highlights that the leverage ratio in the non-bank sector has decreased significantly, indicating a market-wide trend towards deleveraging [6][24] Group 4 - The report outlines the recent changes in the interest rate environment, with the overnight rates rising to 1.40% and 1.51% for R001 and R007, respectively, indicating a tightening liquidity situation [15][25][26] - It notes that the recent adjustments in the bond market have led to a significant increase in the issuance rates of certificates of deposit, reflecting rising costs for banks [29][30] - The report also highlights the ongoing adjustments in the credit bond market, particularly in the long-end segment, where yields have been affected by negative rotations [17][16] Group 5 - The report indicates that the recent changes in tariffs by the U.S. government may have implications for global trade dynamics, with increased tariffs on key countries potentially impacting the bond market [31][32] - It suggests that the market is currently cautious regarding tariff changes, with a wait-and-see approach being adopted by investors [31][32] - The report emphasizes that the bond market's response to external factors, such as tariffs, may not be immediate, and investors are advised to monitor developments closely [31][32]

1. Report Industry Investment Rating No information provided in the content. 2. Core Viewpoints of the Report - In the second quarter, the growth rate of fixed - asset investment slowed down. Given the external uncertainties in the second half of the year, the necessity of stabilizing investment has increased. The new policy - based financial instruments proposed in the April Politburo meeting have attracted high market attention. There is a high probability that the instruments will be implemented in the short term, and the third quarter may be the period for the implementation of broad - credit policies, which will affect the bond market sentiment [1][24]. - The risk of crossing the half - year is controllable, but the institutional fund arrangement is relatively slow. The large - bank net lending scale has significantly increased, and the inter - bank cross - quarter fund progress is relatively slow [3]. - Since June, the bond market's spread exploration has shifted from the mid - term to the ultra - long - term. However, investors should flexibly stop losses and realize profits [4]. - In the bond market this week, the LuJiaZui Conference did not meet expectations, and the yield fluctuated within a narrow range. The central bank's OMO continued net withdrawals, and the capital market was balanced and loose. The net financing of national bonds and policy - based financial bonds decreased, while that of local bonds and inter - bank certificates of deposit increased. The term spread of national bonds widened, and that of China Development Bank bonds narrowed [10][54]. 3. Summary According to the Directory 3.1 New Policy - based Financial Instruments: Progress - The necessity of stabilizing investment has increased due to the slowdown of fixed - asset investment growth in the second quarter and external uncertainties in the second half of the year. Since May, local governments have accelerated the project reserve of policy - based financial instruments, with a possible quota of 500 billion yuan, and the support for science and technology and consumption infrastructure construction may be prioritized [1][14]. - Referring to the experience in 2022, it took about two months from the release of the instrument quota to the completion of the investment, with a relatively fast pace. The policy - based financial supply in 2022 had a leverage ratio of over 4.7 times for credit and over 10 times for infrastructure investment [17]. - The third quarter may be the period for the implementation of broad - credit policies, and attention should be paid to the impact on the bond market sentiment [24]. 3.2 Cross - half - year Risk is Controllable, and Institutional Fund Arrangement is Slow - This week, the tax period passed smoothly. After the tax period, the capital sentiment tightened briefly, which may be related to the increase in the bond market leverage level. The central bank's operations remained relatively active, and the reverse - repurchase balance was at a seasonal high [3]. - The large - bank net lending scale has significantly increased, with the single - day net lending scale reaching 5.3 trillion yuan, a record high for the same period. As of June 20, the inter - bank cross - quarter fund progress was 12%, lower than the previous level. The cross - half - year risk is expected to be relatively controllable [28]. 3.3 Bond Market Strategy: Spread Exploration Shifts from the Mid - term to the Ultra - long - term, but Flexibly Stop Losses and Realize Profits - From April to May, the bond market fully explored the spreads of mid - term interest - rate varieties. The spread quantile of mid - term varieties decreased from 75% - 96% to 44% at the end of May, with limited room for further compression [34]. - In June, the spread exploration shifted to the ultra - long - term. The best - performing maturities since April have experienced two rounds of "short - term → mid - term → ultra - long - term" rotation. The recent ultra - long - term market, mainly driven by trading desks such as funds and other products, is due to the strong demand for capital gains in a low - interest - rate environment and the expected opening of the bond - allocation space for insurance companies in the third quarter [4][37]. - Investors should continue to pay attention to the cost - effectiveness of the ultra - long - term bonds and stop losses and realize profits at appropriate times, such as when the ultra - long - term spreads are fully explored, if the central bank announces bond purchases at the end of June, and in July [5]. 3.4 Bond Market Review: The LuJiaZui Conference did not Meet Expectations, and the Yield Fluctuated within a Narrow Range - **Funding**: The central bank's OMO continued net withdrawals, and the capital market was balanced and loose. The weighted price of DR001 fell back to around 1.37%, and the issuance price of 1 - year national - share bank certificates of deposit dropped to 1.63% [11]. - **Primary Issuance**: The net financing of national bonds and policy - based financial bonds decreased, while that of local bonds and inter - bank certificates of deposit increased [59]. - **Benchmark Changes**: The term spread of national bonds widened, and that of China Development Bank bonds narrowed. The short - term performance of national bonds was better than that of the long - term, while the long - term performance of China Development Bank bonds was better than that of the short - term [54].

Market Overview - The bond market is currently in a "full bow" state, with the median duration of interest rate bond funds reaching a historical high of 5.25 years as of June 20, 2025[1] - The leverage ratio for non-bank financial institutions is approximately 113.9%, up from a low of 113.5% in mid-February 2025, but still below the historical peak of 118.5%[1] Yield Spread Analysis - The yield spread between new and old bonds has been fully explored, with the yield on long-term active bonds declining by about 5 basis points, while older bonds have seen declines of 8-9 basis points[2] - The yield spread between 10-year national development bonds and national treasury bonds has narrowed from a high of 7.2 basis points to the current 3.7 basis points[2] Market Dynamics - The bond market has been characterized by a lack of clear direction, with 12 historical rounds of yield spread compression analyzed, showing that 8 rounds occurred in uncertain market conditions[3] - The compression of yield spreads is often concluded by clear market signals such as interest rate cuts or significant supply increases, which could lead to a re-expansion of spreads[3] Future Outlook - The process of compressing yield spreads may continue until the central bank initiates bond purchases or provides stronger signals, such as allowing treasury bonds to meet reserve requirements[4] - The market is expected to experience increased volatility following the implementation of new monetary policies, particularly around natural easing points like the beginning of a quarter[4] Risk Factors - Potential risks include unexpected adjustments in monetary policy, liquidity changes, and fiscal policy shifts that could impact market stability[5]

Group 1: Open Market Operations - The central bank announced a reverse repurchase operation of 202.5 billion yuan for a 7-day term at a fixed rate of 1.40%, with a total bid amount of 202.5 billion yuan and a successful bid amount of 202.5 billion yuan. The net injection for the day was calculated to be 67.5 billion yuan after accounting for 135 billion yuan of reverse repos maturing on the same day [1]. Group 2: Funding Conditions - As the tax period approaches, the overnight pledged repo rate for deposit-taking institutions has risen by nearly 4 basis points to around 1.41%, while the 7-day pledged repo rate has decreased by nearly 4 basis points. In the overseas market, the latest overnight financing rate in the US is 4.28% [3]. Group 3: Interbank Certificates of Deposit - The latest transaction rate for one-year interbank certificates of deposit among major banks is around 1.67%, showing little change from the previous day [6]. Group 4: Bond Market - The yields on major interbank bonds have mostly declined, with short-term bonds performing slightly better. The 1-year government bond yield is at 1.40%, down by 0.50 basis points, while the 10-year government bond yield is at 1.6425%, down by 0.35 basis points [8]. Group 5: Treasury Futures - Treasury futures closed higher across the board, with the 30-year main contract up by 0.02%, the 10-year main contract up by 0.02%, the 5-year main contract up by 0.04%, and the 2-year main contract up by 0.03% [11]. Group 6: Social Financing and Monetary Supply - Preliminary statistics from the central bank indicate that the incremental social financing scale for the first five months of 2025 reached 18.63 trillion yuan, an increase of 3.83 trillion yuan compared to the same period last year. The total RMB loans increased by 10.68 trillion yuan, and RMB deposits increased by 14.73 trillion yuan. As of the end of May, the broad money (M2) balance was 325.78 trillion yuan, with a year-on-year growth of 7.9% [12].

Group 1: Market Overview - From June 9-13, the second round of China-US negotiations became a major variable affecting interest rate trends, with tariffs remaining unchanged, benefiting bonds and gold as safe-haven assets[1] - As the tax period approached, liquidity tightened, leading to cautious short-term pricing in the bond market, with interest rates and similar rate products slowing down[1] - The one-year government bond yield struggled to break 1.4%, resulting in an overly flat yield curve[3] Group 2: Liquidity and Central Bank Actions - Market concerns about liquidity stability eased as the month progressed, with 1.83 trillion yuan in interbank certificates of deposit successfully renewed[2] - The central bank's proactive measures included increasing the daily open market operation (OMO) injection to 202.5 billion yuan on June 13, reflecting a firm stance on liquidity support[2] - The central bank's actions shifted from implicit to explicit, effectively guiding market expectations and stabilizing funding rates[2] Group 3: Yield Curve Dynamics - Historical analysis indicates that extreme flattening of the yield curve is often linked to central bank tightening, with subsequent steepening reliant on a shift in the central bank's stance[3] - The current yield curve is at a critical point where it may transition from flat to steep, contingent on the central bank's future actions and market adaptation[3] - The 10Y-1Y yield spread is currently at 24 basis points, placing it in the 13th percentile of historical data, indicating limited room for further compression[3] Group 4: Investment Strategy - In anticipation of a potential steepening of the yield curve, investment strategies should focus on increasing duration in portfolios, particularly in 10-year non-active bonds and high-quality local government bonds[6] - The duration of interest rate bond funds has reached a historical high of 5.23 years, while credit bond funds have risen to 2.43 years, indicating heightened risk exposure in the market[6] - Despite high duration levels, the market's sensitivity to negative factors may increase, necessitating careful monitoring of market conditions[6]

Group 1: Open Market Operations - The central bank announced a 7-day reverse repurchase operation on June 9, with a fixed rate and quantity tendering of 173.8 billion yuan at an interest rate of 1.40%, with the same amount being the bid and awarded [1] - On the same day, there were no reverse repos maturing, resulting in a net injection of 173.8 billion yuan [1] Group 2: Funding Conditions - Following a trillion-yuan reverse repurchase operation that boosted confidence, the central bank continued to inject liquidity, leading to a more relaxed interbank funding environment, with overnight pledged repo rates falling over 3 basis points, dropping below 1.4% [3] - The latest overnight financing rate in the U.S. stands at 4.29% [4] Group 3: Interbank Certificates of Deposit - The latest transaction for one-year interbank certificates of deposit among major banks is around 1.67%, showing a slight decline from the previous day [6] Group 4: Bond Yield Rates - The yields for various government bonds are as follows: 1Y at 1.4100%, 2Y at 1.4250%, 3Y at 1.4350%, 5Y at 1.4976%, 7Y at 1.5865%, and 10Y at 1.6550% [8] - The yields for policy bank bonds and local government bonds also show slight variations, with some yields decreasing [8] Group 5: Recent Economic Indicators - In May, China's CPI decreased by 0.1% year-on-year, slightly better than the expected decline of 0.2%, while PPI fell by 3.3%, worse than the expected drop of 3.2% [12] Group 6: International Economic Dialogue - During a visit to the UK, China's Vice Premier He Lifeng discussed economic and financial cooperation with UK Chancellor of the Exchequer, emphasizing the need for mutual efforts to implement agreements and deepen economic relations [14]