- On the first trading day of July, China's interbank bond market continued its weak trend. The massive net withdrawal in the open market did not bring the expected early-month easing, and the yields on major-term government bonds generally continued to rise.
- Meanwhile, the new regulation that stops brokerage firms from providing quotes and matching services to unsigned clients officially took effect, further weakening the already cautious trading sentiment.
- In an environment where both funding conditions and trading convenience are under pressure, the market has become more sensitive to the scale of subsequent buyout reverse repos and the positioning of short-term interest rates.
Massive Net Withdrawal Suppresses Early-Month Easing Expectations
The central bank's single-day net withdrawal exceeded 1 trillion yuan, a rare large-scale operation recently. The market originally expected liquidity to naturally ease after the month-end, but in reality, liquidity has not significantly improved, leaving bond bulls without a reason to re-enter the market.
Yield Rise Reflects Defensive Stance
The yields on 30-year special government bonds and 10-year active government bonds rose simultaneously, indicating that both the long and medium ends are conceding on price. This is not due to a sudden weakening of macro fundamentals, but rather the trading market discounting for funding uncertainty and liquidity of holdings.
New Quotation Regulation Amplifies Liquidity Concerns
After unsigned clients can no longer receive inquiries, quotes, and matching support, some institutions' efficiency in obtaining market prices has declined. Although such institutional friction does not necessarily change the trend, it can amplify transaction hesitation and volatility in a weak environment.
Future Focus on Central Bank's Continuation and Rate Anchors
The most important observation point going forward is the arrangement for the continuation of buyout reverse repos maturing in July, and whether overnight and other short-term rates will fall again. If the central bank releases clearer stability signals, the current pace of yield rise may slow down.
