1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The 2025 theoretical net financing scale of national debt is 6.66 trillion yuan, and the estimated annual net financing scale is 6.72 trillion yuan, which is relatively close to the theoretical scale [1][2]. - The change in the fourth - quarter national debt issuance plan will affect the pricing of ultra - long - term national debt individual bonds, especially the 30 - year bonds. Bond 25T2 is likely to become the main bond again, and bond 25T6 may follow bond 25T5 in pricing [3][20]. - For 30 - year national debt trading, focus on bond 25T2; for allocation, consider bonds such as 25T5, 24T1, 230023, and 250002, but their spread compression probability with the active bond 25T2 will increase only when the bond market performs well. The 20 - year and 50 - year special national debts have no obvious spread advantage [5][22]. 3. Summary by Relevant Catalogs 3.1 From the national debt issuance plan to see the subsequent supply rhythm of national debt - According to the Two Sessions, the 2025 central fiscal deficit scale is 4.86 trillion yuan for ordinary national debt, 1.30 trillion yuan for ultra - long - term special national debt, and 0.50 trillion yuan for capital injection special national debt, with a total theoretical net financing scale of 6.66 trillion yuan. As of the end of September, the net financing scale was 5.40 trillion yuan [1][11]. - In 2025, the number of national debt issuances in each quarter is 42, 56, 57, and 49 respectively. The difference between the fourth and third quarters lies in the decrease of ultra - long - term special national debt and the increase of ultra - long - term ordinary national debt. Assuming the fourth - quarter issuance continues the current progress, the remaining 70 billion yuan of ultra - long - term special national debt will be issued in October. The estimated monthly issuance scale from October to December is about 1.40 trillion yuan, and the net financing scales are 0.38 trillion yuan, 1.02 trillion yuan, and - 0.08 trillion yuan respectively [2][14]. 3.2 Impact of the national debt issuance plan on the pricing of ultra - long - term individual bonds - The fourth - quarter national debt issuance plan is different from the one announced in April. The 30 - year ultra - long - term special national debt will not be re - issued in October. The new bond 25T6's scale growth expectation may be falsified, and its probability of continuing as the main bond will decline, while 25T2 is likely to become the main bond again [3][20]. - Bond 25T6 may follow bond 25T5 in pricing, and the spread between 25T6 and 25T5 may maintain at 6 - 12BP (corresponding to 3% - 6% VAT). Currently, the spread has rebounded to about 4.5BP, and there is a possibility of further increase [4][21]. - The spread between non - main and main 30 - year bonds has widened significantly. Non - main bonds have allocation value, but the allocation power may not be strong because institutions prefer local bonds with higher interest rates [4][22].

Core Viewpoint - The A-share market is experiencing a significant rally, with market capitalization surpassing 100 trillion yuan and the Shanghai Composite Index reaching a nearly ten-year high, indicating the beginning of a "slow bull" market. In contrast, the bond market is facing a downturn, with the 30-year government bond futures experiencing their largest decline in months, highlighting a "risk preference" shift in the current macroeconomic landscape [1][2]. Group 1: Stock Market Dynamics - The steady rise in the A-share market is driven by optimistic expectations regarding policy benefits, market reforms, and economic stabilization, leading to an increase in investor risk appetite and a shift of funds from stable assets to high-risk equity assets [1][2]. - The stock market's strong performance is often associated with economic recovery and potential inflation expectations, which diminishes the market's expectations for macroeconomic policy easing, thereby putting pressure on bond prices [2][3]. Group 2: Bond Market Adjustments - The recent adjustments in the bond market are primarily due to direct impacts from fund diversion, rather than changes in the credit risk of bonds themselves. The bond market's decline reflects a reset of the market risk pricing model [2][3]. - Despite short-term pressures, the long-term fundamentals supporting the bond market remain intact, suggesting that the disturbances caused by the stock market are likely to be temporary [3][4]. Group 3: Future Outlook for Bonds - The peak of government bond net issuance for the year has passed, leading to a gradual reduction in supply pressure, which is favorable for the stabilization and recovery of the bond market [4]. - Bonds, as "safe-haven assets," offer relatively stable returns and lower risk levels, making them attractive to large institutions and individual investors seeking diversified asset allocation [4].

Group 1 - The Bank of Japan maintained its interest rates and raised inflation expectations, but the comments from Governor Kazuo Ueda were perceived as not sufficiently hawkish, leading to a significant depreciation of the yen [1][3][4] - Following the central bank meeting, the yen initially strengthened but reversed course after Ueda's remarks, dropping 0.4% to 150.04, marking a new low since April 2 [3][4] - Analysts noted that the central bank's lack of a hawkish stance diminished market expectations for a near-term rate hike, with the probability of a rate increase for the year now at 66%, up from 59% before the US-Japan trade agreement [4][5] Group 2 - The recent US-Japan trade agreement, which includes a 15% tariff imposed by the US, has complicated the Bank of Japan's policy-making, as Ueda indicated that the agreement would make it easier to assess the impact of tariffs in the coming months [5][6] - Political instability in Japan has further complicated market dynamics, with Prime Minister Shigeru Ishiba's ruling coalition losing its majority in the upper house, raising concerns about potential increases in government spending [5][6] - The uncertainty surrounding domestic politics has weakened the yen and increased long-term government bond yields, with analysts suggesting that the decision to maintain interest rates was more about disaster control than a directional policy shift [6]

Summary of Conference Call Notes Industry Overview - The notes primarily discuss the bond market and macroeconomic conditions in China, focusing on interest rates, government financing, and corporate profitability [1][3][5]. Key Points and Arguments 1. **Economic Conditions**: June economic data shows significant divergence in supply and demand, with household income growth lagging behind GDP growth. External demand for exports to the U.S. has sharply declined, indicating persistent insufficient total demand [1][3]. 2. **Government Financing**: It is projected that government financing will decrease by over 2 trillion yuan in the second half of 2025, following a peak in social financing growth in July. This decline in financing is expected to contribute to lower interest rates [1][4]. 3. **Corporate Profitability**: Corporate profit margins are under pressure due to declining total demand and trade tensions, resulting in low investment returns. The central bank maintains a moderately loose monetary policy, alleviating concerns about policy tightening [1][5]. 4. **Interest Rate Projections**: The current central level for the 10-year government bond yield is 1.5%, with the current yield at 1.7%. Short-term projections suggest that rates may decline further, potentially falling below 1.5% [1][7]. 5. **Liquidity Management**: The central bank's operations indicate a stable interest rate level around 1.8% during tight liquidity periods. The reasonable range for current operations is estimated between 1.4% and 1.7% [1][8]. 6. **Asset-Liability Matching**: Banks are achieving a yield of approximately 1.5% on mortgages, while the yields on 10-year and ultra-long government bonds are 1.7% and 1.9%, respectively. Insurance companies are also adjusting their guaranteed rates below 2%, making long-term bonds attractive [1][9]. 7. **Redemption Pressure**: Current redemption pressure is primarily preventive and not indicative of a trend, similar to the situation in August 2024. The market is not expected to experience significant volatility due to this preventive redemption [2][10]. 8. **Market Outlook**: The third quarter is expected to see increased volatility in funding rates, but the overall range will remain between OMO reductions of 20 basis points and increases of 20 basis points, indicating a more accommodative environment compared to the second quarter [2][11]. Additional Important Content - The notes emphasize the lack of significant counter-cyclical demand policies to address the ongoing economic challenges, which could further impact total demand and interest rates [1][3]. - The analysis suggests that the bond market is not at risk of a trend reversal to bearish conditions, as the fundamental factors driving interest rates downward remain unchanged [3].

Core Viewpoint - The Bank of Japan's policy board member Takeda Soichi emphasizes the need to be cautious about the rising risk premium associated with ultra-long-term government bonds and the increasing volatility of the yield curve, which could inadvertently trigger a broad transmission of monetary tightening effects in the market [1] Group 1 - The risk premium for ultra-long-term government bonds is on the rise [1] - There is an increase in the volatility of the yield curve [1] - These factors may lead to unintended consequences in the form of monetary tightening effects spreading throughout the market [1]

Group 1 - U.S. financial markets are closed on Thursday, with U.S. stock futures and European stocks declining, as Nasdaq 100 futures fell over 1% [1] - The Chinese Ministry of Commerce is accelerating the review of export license applications related to rare earths in accordance with laws and regulations [1] - The Chinese National Narcotics Control Office has decided to regulate N-ethylpentylone and 12 new psychoactive substances [1] Group 2 - The White House spokesperson stated that Trump will decide within two weeks whether to strike Iran [1] - Trump has repeatedly called for the Federal Reserve to cut interest rates by 2.5 percentage points and criticized Powell as foolish [1] - The EU is pushing for a "UK-style" trade agreement with the U.S., increasingly accepting a 10% tariff level as a baseline for trade agreements [1] Group 3 - Canada is considering raising countermeasures against U.S. steel and aluminum tariffs to protect domestic industries [1] - The Bank of England maintained its current policy but signaled a dovish stance, with the number of officials supporting rate cuts exceeding expectations, raising the likelihood of two 25 basis point cuts this year [1] - Japan is adjusting its bond issuance plan, significantly reducing the issuance of super long-term bonds by over 10% and increasing the issuance of short-term bonds [1] Group 4 - A reminder that China's June LPR will be announced on Friday [1]

Group 1 - The Ministry of Finance in Japan stated that starting the repurchase of ultra-long-term government bonds from July is unrealistic and unimaginable [1] - The claim regarding the formulation of a repurchase policy for ultra-long-term government bonds is inaccurate [1]

Core Viewpoint - The Japanese government is considering repurchasing some ultra-long-term bonds issued at low interest rates to prevent sudden increases in bond yields [1] Group 1: Government Actions - The government aims to address the oversupply of ultra-long-term bonds, which include bonds with maturities of 20, 30, or 40 years [1] - Following the news, Japanese government bond yields declined, indicating market relief [1] Group 2: Upcoming Meetings and Decisions - The Ministry of Finance, responsible for overseeing the government's bond issuance plan, will hold meetings with bond market participants on June 20 and June 23 to make a final decision [1] - Approval from the budget is required for the repurchase of ultra-long-term Japanese government bonds, which may take time [1]

Group 1 - The Bank of Japan is increasingly concerned about the significant fluctuations in ultra-long-term bond yields and their potential impact on short-term borrowing costs and the economy [1] - Bank of Japan Governor Ueda Kazuo emphasized that medium and short-term interest rates have a greater impact on the Japanese economy compared to ultra-long-term yields [1] - The recent surge in ultra-long-term government bond yields to historical highs reflects growing market concerns over the deteriorating fiscal conditions of developed economies [1] Group 2 - Market participants are focused on the Bank of Japan's upcoming policy meeting on June 16-17, where the current bond purchase reduction plan will be evaluated [1] - A majority of surveyed bond market participants advocate for maintaining or slightly slowing the pace of reduction starting from the fiscal year 2026 [2] - Some analysts suggest that the current market turmoil may influence the central bank's discussions regarding future reduction strategies [2]

Core Viewpoint - The Bank of America analysts indicate that the Bank of Japan is unlikely to address the supply-demand imbalance causing the surge in ultra-long-term government bond yields [1] Group 1 - Analysts predict that the Bank of Japan will continue to reduce its bond purchases by 400 billion yen per quarter until March 2026 [1] - Starting from April 2026, the bond purchase reduction is expected to further decrease to 300 billion yen per quarter, with the plan extended for another year [1] - The analysts express that the Bank of Japan does not plan to respond to the oversupply issue of ultra-long-term bonds [1]