- Chinese government bond futures opened higher and continued to rise on Thursday. The yield on the active 10-year government bond 260005 fell sharply by 0.8 basis points to 1.7185%, while the yield on the 30-year special government bond 260002 decreased by 0.35 basis points to 2.2060%. Traders suggest that institutions may further test the 1.70% threshold.
- The seasonal tax period's disturbance on liquidity is marginally fading, with interbank liquidity shifting back to a looser pattern. The People's Bank of China conducted a 7-day reverse repo operation of 101.3 billion yuan today, marking the seventh consecutive trading day of net open market injection.
- Geopolitical risk premiums are rising as the Middle East situation suddenly worsens. Coupled with weaker core credit and fundamental data from China in April, and the A-share liquor sector leading the decline, multiple factors are driving safe-haven funds into fixed-income assets.
Warming Trend in Cash and Futures Markets
Today, yields on Chinese interbank bond market cash bonds generally fell slightly, with active trading in ultra-long and medium-to-long-term varieties. The main government bond futures contract showed a unilateral upward trend after the morning opening. Specifically, the transaction price of the 30-year special government bond corresponds to a yield that fell to a historical low of 2.2060%, demonstrating strong buying support. Traders from several securities firms and banks in Beijing and East China stated that short-term bullish sentiment is dominant, and the appeal of bond assets as a base position is hard to shake amid continued stock market corrections.
Liquidity Returning to Looser State Supports Short End
The previously widespread market concern about the May tax period disturbance did not cause substantial tightening of liquidity. As the phased tax payment factors completely dissipate, interbank market liquidity appears ample. Traders pointed out that the stable operation of the current liquidity directly eliminates concerns for the bond market. If liquidity continues to remain inherently loose in the future, the downward space for short-term interest rates may further open, thereby promoting long-term performance through the term spread transmission.
Risk Aversion Rises Due to Middle East Situation Escalation
Sudden changes in international geopolitical factors have become an external catalyst driving the bond market's strength today. According to Tasnim News Agency, the Iranian Revolutionary Guard attacked a U.S. airbase, and Kuwait also intercepted missiles and drones. This dramatic upheaval in overseas security situations has led to an overall decline in global financial market risk appetite, with safe-haven capital quickly flowing back into high-certainty Chinese sovereign debt assets.
Central Bank's Restrained Operations and Market Outlook
Although the People's Bank of China's reverse repo operation volume today was slightly reduced compared to the previous day, it fully met the needs of primary dealers, with the winning bid rate maintained at 1.40%. This indicates that while providing liquidity support, the central bank's operational stance remains restrained. The fixed income research team at CITIC Securities pointed out in their latest report that the macroeconomic fundamentals are expected to maintain a structure of weak domestic demand and strong external demand in the second half of the year. After the social financing growth rate bottoms out, the deposit relocation effect will continue to support allocation demand. If core inflation does not unexpectedly rebound, the 10-year government bond yield is expected to maintain a warm oscillation in the range of 1.7% to 1.9%.
