This round of the bond market's New Year's trend may have ended. It is expected that the short-term depreciation space of the Renminbi exchange rate is limited.

Zheshang releases research report, stating that the current year-end bond market rally may have ended, and the next phase may see a period of retreat in the 10-year government bond yield. In 2025, the bond market may exhibit increased volatility due to factors such as economic recovery, fiscal stimulus, and disturbances in China-US relations. The short-term depreciation space for the Renminbi exchange rate may be limited, but there may still be potential for appreciation against the trend. Key points from Zheshang: 1. The current year-end bond market rally may have ended: At the beginning of the year, the central bank conducted a large number of open market operations, using 7-day reverse repurchase agreements to hedge against the mid-month maturity of MLF. Over the past two weeks, the funding conditions have been tight, with funding rates significantly rising and bond yields inverting. We believe that the current year-end bond market rally has probably ended, and the next phase may see a period of retreat in the 10-year government bond yield. 2. Increased volatility in the bond market in 2025: Looking back at 2024, the main logic was clear and disturbances were limited, forming the main theme for bond market trading throughout the year. For the bond market in 2025, factors such as expectations of economic recovery, fiscal supply shocks, and China-US relations may constitute additional disturbances, leading to significantly increased volatility in the bond market. 3. Renminbi exchange rate path under different time frames: In the short term, the central bank is loosening the exchange rate flexibility while stabilizing the exchange rate through measures such as the "three resolutes" and adjusting the macro-prudential regulation parameters for cross-border financing. The room for Renminbi depreciation may be relatively limited. The long-term direction of Renminbi depreciation may be relatively certain, but if scenarios such as easing of China-US relations, Renminbi asset strength, and a major drop in US stocks due to an economic downturn in the US occur, the Renminbi exchange rate may still have an appreciation path. Risk warning: - Macro-economic policies may undergo unforeseen changes; - Institutional behavior may have a certain degree of unpredictability.