Core Viewpoint - The article discusses the rising risk aversion in global debt markets due to the U.S. government shutdown and trade tensions with China, leading to a significant influx of capital into safe assets like U.S. Treasuries [2][3]. Group 1: Market Trends - The U.S. Treasury yield curve has steepened, with 10-year and 30-year yields decreasing by 6.2 and 7 basis points respectively, while the 2-year and 10-year spread remains at 52.8 basis points [3]. - European sovereign bonds have also benefited from the risk-averse sentiment, with Germany's 10-year bond yield falling by 7 basis points to 2.63% [3]. - The offshore RMB sovereign bond market saw a rise, with the 10-year yield increasing by 5.18 basis points to 1.9109%, and the domestic and offshore yield spread widening from 3.22 to 11.48 basis points [3]. Group 2: Liquidity and Credit Risk - The global funding market is characterized by short-term easing and ample liquidity, with the U.S. SOFR narrowing from 0.026% to 0.048%, indicating sufficient interbank funding supply [4]. - Despite stable core liquidity indicators, the re-pricing of sovereign credit risk has led to structural differentiation in interest rates across markets, with a notable decline in the 10-year U.S. Treasury yield reflecting increased demand for safe assets [4]. - Investment-grade bond spreads remain stable, while high-yield bond spreads have widened, indicating heightened sensitivity to credit risk in a liquid environment [4]. Group 3: Strategic Recommendations - The article suggests a strategic asset allocation approach that includes overweighting safe assets, increasing exposure to emerging market sovereign debt, tactically overweighting long-term U.S. Treasuries, and being cautious about credit risk [4].

Group 1 - The report highlights that the global bond market is experiencing heightened risk aversion due to the U.S. government shutdown and tariff threats, leading to a recommendation for long-term developed country bonds and emerging market sovereign debt while reducing high-yield credit exposure [1][6][7] - The U.S. Treasury yield curve has steepened significantly, with the 10-year and 30-year Treasury yields decreasing by 6.2 and 7 basis points respectively, reflecting increased demand for safe assets amid economic uncertainty [6][8][9] - The report notes that the credit spreads for U.S. high-yield bonds widened by 17 basis points to 2.631%, indicating a growing sensitivity to credit risk in a liquidity-rich environment [8][10][9] Group 2 - The report indicates that the offshore RMB sovereign bonds experienced a weekly increase, with the 10-year yield rising by 5.18 basis points to 1.9109%, driven by factors such as enhanced liquidity management and a hot primary market [14][15] - It mentions that the issuance of offshore bonds was concentrated among high-rated financial institutions, with all newly issued bonds rated AAA and primarily with a one-year maturity [17][18] - The report outlines that the issuance structure reflects a mix of short-term financing from financial institutions, long-term allocations from supranational entities, and hybrid instruments from the industrial sector, with U.S. dollar bonds dominating the market [20][21]