Report Summary 1. Investment Rating No investment rating for the industry is provided in the report. 2. Core Viewpoints - The central bank's tolerance of the current 10Y Treasury yield means it's unlikely to significantly raise DR rates if the (ultra) long - end of the yield curve stays at current levels or declines slightly and slowly [3][14]. - Before the next OMO rate cut, the room for further decline in the DR007 and DR001 central rates is limited [1][2][11]. - The 1Y CD rate is currently slightly overvalued, and the central bank will consider its impact on bank net interest margins, loan issuance, yield curve long - end, and future Treasury trading when supplying medium - term base money [15]. 3. Summary by Section 7 - month Funding Situation - Since July, the money market interest rates have been falling. As of July 4, DR001 and DR007 have dropped to 1.31% and 1.42% respectively, but the room for further decline is limited before the next OMO rate cut [1][9]. - OMO reverse repurchase operations have "tool mode" and "non - tool mode". In the "non - tool mode", the DR007 central rate is slightly higher than the 7D OMO rate, and DR001 is slightly lower. Currently, the spreads between DR007, DR001 and 7D OMO are lower than the 2024 average, approaching the 1/4 quantile [2][11]. - In the "non - tool mode", DR007 is not an indication of monetary policy attitude and is unlikely to decline ahead of the 7D OMO rate. In 2024, the 7D OMO rate changed first, and then DR007 adjusted accordingly [2][11]. Treasury Yield Analysis - The 10Y Treasury yield has been stable around 1.65% recently, and the central bank tolerates its current trend [3][14]. - Since June, the decline of the 50Y Treasury yield has been greater than that of the 10Y variety. As of July 4, the spread between the 50Y and 10Y Treasuries has compressed by 11.1bp compared to the end of May. If the (ultra) long - term interest rate yields decline significantly or rapidly, OMO may switch from "non - tool mode" to "tool mode", and the DR007 central rate may rise significantly [4][14]. CD Rate Analysis - The 1Y CD rate is currently slightly overvalued. On July 4, the spread between the 1Y AAA - rated CD and 7D OMO was 19.3bp, lower than 83% of trading days in 2024 [15]. - The central bank will consider the impact of CD rates on bank net interest margins, loan issuance, yield curve long - end, and future Treasury trading when supplying medium - term base money [15].