On Wednesday, China's bond market saw mixed movements, with overall volatility extremely narrow. In the morning, the market opened higher driven by expectations of easing international tensions, but then retreated due to the weakening demand for safe-haven assets and the adjustment of liquidity expectations. Market participants are weighing the impact of the plunge in international energy prices and the smooth offset of domestic quarter-end funds.
Policy Operation Observation
The central bank has shown a protective stance in liquidity management. In addition to a net injection of 58 billion yuan through reverse repos, the 500 billion yuan MLF (Medium-term Lending Facility) operation slightly exceeded the maturing amount, indicating that regulators intend to maintain ample and stable liquidity in the financial system at the quarter-end. Currently, the one-year MLF rate remains stable, with bidding and awarded amounts balanced, reflecting a relatively stable demand for medium and long-term funds within the banking system.
Trader Insights
Shanghai broker traders noted that the current bond market is at the crossroads of an information vacuum and geopolitical conflicts. On one hand, the unpredictable style of the Trump administration makes the endgame of the Middle East situation difficult to foresee, causing drastic oil price fluctuations that lead to rapid in-and-out movements of safe-haven funds; on the other hand, domestic fundamental data has yet to be released, leading institutions to favor short-term bonds for safety in the absence of clear directional guidance. Currently, the valuation pressure on ultra-long bonds persists, and the momentum for a breakthrough above 2.28% on the 30-year active bond yield has significantly weakened.
