Summary of Conference Call Notes Industry Overview - The discussion revolves around the bond market in the context of geopolitical tensions in the Middle East, particularly the impact of the ongoing conflict on oil prices and inflation, and its subsequent effects on the domestic bond market [1][2][3]. Key Points and Arguments 1. **Impact of Middle East Conflict on Oil Prices** - The conflict has led to a significant reduction in the daily shipping volume through the Strait of Hormuz, dropping from approximately 70 vessels to nearly zero [2]. - Brent crude oil prices have surged to over $90 per barrel, with a notable increase of over 50% since December 2025 [1][2]. 2. **Inflation and Bond Market Dynamics** - The supply-side shocks from rising oil prices have limited effects on the domestic bond market, as historical data suggests that such price increases do not alter the downward trend of bond yields [2]. - Demand-side inflation is identified as the core variable that could influence the bond market, contrasting with supply-side inflation which is seen as detrimental to economic growth [2]. 3. **Global Macroeconomic Narrative Shift** - The macroeconomic narrative has shifted from "AI apocalypse" to "stagflation," with the latter being more relevant to the current bond market conditions [3]. - The risk of stagnation is considered more significant than inflation risk, suggesting that a global recession could benefit the domestic bond market [3]. 4. **Central Bank Monetary Policy Stance** - The central bank is unlikely to implement significant quantitative easing, as indicated by recent statements and reports [4][5]. - However, there is an expectation of marginal improvements in liquidity through measures such as buyback operations and government bond purchases [5]. 5. **Investment Strategy Recommendations** - The current geopolitical situation presents more opportunities than risks for the bond market, suggesting a proactive investment approach [6]. - It is recommended to focus on bonds with maturities of 10 years or less, as the market structure appears healthy with low duration in rate bond funds [6]. - Attention should also be given to structural opportunities, such as the potential compression of spreads between policy bank bonds and government bonds [6]. 6. **Long-term Bond Outlook** - While short-term pressures on long-term bonds (e.g., 30-year bonds) may be significant due to inflation expectations, there is an anticipated rebound in their yields after a decline in mid-term bond yields [7]. Other Important Insights - The current market reaction to geopolitical tensions is largely emotional, potentially creating opportunities for strategic positioning rather than posing risks [2]. - The reduction in the outflow pressure on bank liabilities due to regulatory measures may further support the bond market [5]. - The expected convergence of deposit rates towards 1.5% could open up further downward potential for government bond yields [5].