Shenwan Hongyuan: From August to October may be a volatile period for the bond market, but the short and medium-term are expected to remain stable.

Shenwan Hongyuan's report states that the operating range of the 10-year government bond yield in China from August to October may be between 1.65% and 1.80%. The conditions for a downward breakout in interest rates are relatively harsh, but interest rate adjustments may easily cause pulse-like shocks. Fixed income analyst Huang Weiping and others' reports suggest that August to October may be a turbulent period for the bond market, with the medium to short end potentially showing stability and the yield curve possibly steepening compared to the present. In terms of pace, there may not be significant pressure in August, considering the peak in government bond supply and the need for monetary and fiscal coordination to ensure liquidity. If adjustments in the bond market intensify, the central bank may restart open market operations of government bond purchases. Under the bottom-line thinking of preventing capital flight and risks, liquidity is more likely to remain loose rather than further loosened. The transition between the third and fourth quarters may be a risk window to watch. After the decrease in government bond supply, the probability of liquidity hedging decreases, while facing a period of verification for the anti-insulation effect with the Consumer Price Index and Producer Price Index potentially showing signs of rebound. The second half of the year may be a period with lower odds in the bond market and higher odds in the stock market, as residents move their savings to stocks and insurance funds flow into the stock market; the stock market bottoms out, the wealth effect gradually emerges, and with low supply and high demand in the stock market, the bond market's fundamental conditions and liquidity pricing weaken, making it more sensitive to changes in price expectations.