Guosen: Current US bond investments need to focus on structural selection, with a preference for medium and short-term bonds, and cautious allocation to long-term bonds.

Guosen released a research report stating that the resilience of U.S. inflation and employment data, as well as the uncertainty of trade policy, have led to the delay of rate cuts by the Federal Reserve until September or later. At the same time, long-term U.S. Treasury bond yields continue to be under pressure due to fiscal deficits and supply-demand imbalances, leading to increased risks for 30-year bonds. It is recommended that investors focus on short to medium-term U.S. Treasury bond allocations, with a preference for 2-5 year bonds to balance returns and volatility; cautiously allocate to long-term bonds, and consider a moderate allocation to TIPS or floating rate bonds to hedge against inflation and interest rate risks. In addition, diversifying with global asset allocations and introducing other sovereign bonds moderately can enhance portfolio flexibility. Guosen's views are as follows: In May, U.S. non-farm employment slowed down, and the unemployment rate increased, indicating weakness in the labor market. Non-farm employment added 139,000 jobs in May, slightly higher than expected but the lowest in the past three months. The employment data for the previous two months was revised downwards by a total of 95,000 jobs, weakening the overall performance. While the unemployment rate remained at 4.2% on the surface, it actually rose to 4.244%, the highest since 2021, showing initial signs of weakness in the labor market. Average wages rose by 0.4% month-on-month and 3.9% year-on-year, exceeding market expectations of 0.2% and 3.7% respectively, indicating strong performance. However, this was mainly due to a contraction in labor supply rather than strong demand, with over 600,000 full-time positions lost, and the labor force participation rate dropping to 62.4%, reaching a three-month low. Employment in manufacturing decreased by 8,000 jobs, and federal government job cuts amounted to 22,000, indicating the impact of policy uncertainty and fiscal austerity. Although employment in the healthcare and hotel industries continued to grow, it was difficult to reverse the overall weakness. The Federal Reserve's Beige Book shows a slight slowdown in the U.S. economy, as businesses plan to pass on costs and reduce hiring due to tariffs and uncertainty, leading to a more pessimistic outlook. The latest Federal Reserve Beige Book pointed out that as of May 23rd, economic activity in the U.S. had slightly declined in recent weeks, as tariffs and high uncertainty have restrained business and household confidence, with reports from various regions showing weak labor demand and delayed hiring, and moderate wage increases. Most regions reported price increases at a "moderate" pace, with businesses generally expecting costs and prices to continue rising, and planning to pass on tariff-related costs to consumers in the next three months. As a result, businesses in many areas have raised prices, reduced hiring, closed production lines, or laid off employees, while international visitors have decreased, leading to weakened retail and tourism activities. Overall, the economic outlook is "slightly pessimistic and uncertain". The market ignores President Trump's calls, with rate cut expectations remaining at two times within the year, with the first cut expected in September. Despite President Trump's recent comments criticizing the Federal Reserve's "too late" actions as a disaster, calling for a 1 percentage point rate cut as Europe has already cut rates 10 times, the market is ignoring Trump's urging for a rate cut, and continues to reduce rate cut expectations for June and July. According to the CME's "FedWatch" tool, the probability of maintaining interest rates in June is 99.9%, with only a 0.1% probability of a 25 basis point cut, while in July the probability of maintaining interest rates is 85.5%, with only a 14.5% probability of a cumulative 25 basis point cut. It is expected that monetary policy will remain cautious in the short term, awaiting further clarification on inflation and trade dynamics. U.S. bond yields are rising across the board, with slight narrowing of term spreads. Over the past two weeks, U.S. bond yield curves have shown a bearish flattening trend, with 1-year/2-year/3-year/5-year/10-year/20-year/30-year U.S. Treasury yields changing by -1/4/6/5/0/-4/-7 basis points, and 10Y and 2Y yields at 4.51% and 4.04% respectively, resulting in a slight narrowing of the 10Y-2Y yield spread to 47 basis points. Risk warnings: Uncertainty in U.S. economic, monetary, and fiscal policies, credit risks of issuers, and uncertainty in international political situations.