Report Industry Investment Rating No relevant content provided. Core View of the Report The central bank's attitude has eased, with increased reverse repurchase and MLF投放, and falling interest rates. The downward space for funds is greater than the upward space. The central bank's response to the tariff shock has been calm, and the decline in interest rates has been limited. The weakening fundamentals may drive interest rates down further. There are two possible "broad money" models, and the second model is more likely, with the negative impact of monetary factors on the bond market decreasing [5][6][37]. Summary by Relevant Catalogs 4 - Month Review: Lowered Fund Center, but Weak Expectations for Interest Rate Cuts - **Central Bank's Attitude**: The central bank's attitude in April was "stable with a slight easing." Net 7 - day reverse repurchase was 320.8 billion yuan, and 1 - year MLF had a net injection of 50 billion yuan, with a total open - market operation injection of 820.8 billion yuan. However, the net withdrawal of outright reverse repurchase was 50 billion yuan. The central bank's current attitude towards the funds remains stable, but has eased compared to the beginning of the year [2][12]. - **Fund Price**: The central level of fund interest rates for all terms decreased in April compared to March. DR001 and DR007 decreased by 10bp and 15bp to 1.67% and 1.73% respectively; R001 and R007 decreased by 15bp and 19bp to 1.71% and 1.77% respectively. The spread between DR007 and the 7 - day reverse repurchase rate narrowed to 23bp [3][13]. - **Certificate of Deposit**: In April, the issuance volume and price of certificates of deposit decreased. The total issuance volume of inter - bank certificates of deposit by state - owned and joint - stock banks dropped from 2.7 trillion yuan to 1.7 trillion yuan. The weighted average issuance rates of state - owned and joint - stock banks' inter - bank certificates of deposit decreased by 23bp and 22bp respectively, and the yields to maturity of 3M, 6M, and 1Y certificates of deposit decreased by 21bp, 21bp, and 19bp respectively [3][14]. - **Interest Rate Cut Expectations**: The market has not restarted "interest rate cut trading." From the perspectives of IRS:FR007 and FR007 spread, floating - rate and fixed - rate bond YTM spread, and the monetary tightness and looseness expectation index, the expectation of interest rate cuts in the bond market in April was volatile, mainly affected by changing tariff policies and the "determination" of domestic monetary policy [4][15]. 5 - Month Outlook: External and Internal Pressures Cause Disturbances, and There May Be Room for Funds to Go Down - **Central Bank's Attitude and Interest Rate Space**: Compared with the "abnormally high" fund - policy spread in Q1, the central bank's attitude has eased, with increased reverse repurchase and MLF投放, and falling interest rates for two consecutive months. The downward space for funds is greater than the upward space [5][25]. - **Tariff Impact**: The central bank has been "calm" in the face of the tariff shock. The decline in interest rates since the trade friction has been limited compared to historical shock events. From March to April, the spread between DR007 and the policy rate only narrowed by 39bp [5][25][26]. - **Fundamentals**: The fundamentals do not support a trend of rising fund prices. The PMI and building materials composite index have declined, and the negative impact of trade friction on the economy has been reflected in multiple dimensions. If the fundamentals weaken, it may drive interest rates down further [5][29]. - **Government Bond Financing**: In May, the net financing scale of government bonds is expected to increase significantly compared to April. The estimated net financing scale of national bonds is about 970 billion yuan, and that of local bonds is about 450.3 billion yuan, with a total of about 1.4 trillion yuan [32]. - **Liquidity Gap**: The liquidity gap in May may narrow slightly compared to April, mainly due to the lower maturity of outright reverse repurchase. However, attention should be paid to the disturbance of government bond issuance [33][34]. - **Broad Money Path**: There are two possible "broad money" models for the central bank. The second model (first compressing the spread and then cutting the policy rate) shows more signs of implementation, and the negative impact of monetary factors on the bond market is decreasing [6][37].