Summary

On February 21, the central bank conducted a 7-day reverse repo operation totaling 18.25 billion yuan through a fixed-rate and volume tender, with an operational rate of 1.5%. The money market repo rates increased, and government bond futures close low across the contract.

Core Opinion

■ Market Analysis

Macroeconomic: (1) Macroeconomic Policies: On January 22, the Central Financial Commission approved a plan to promote the entry of medium- and long-term funds into the market. The plan focuses on increasing the investment proportion and stability of commercial insurance funds in A-shares, optimizing the investment management of social security and pension funds, improving the market-based operation of enterprise pension funds, expanding the scale of equity funds, and optimizing the capital market investment ecosystem. (2) Inflation: In January, CPI increased by 0.5% YOY.

Liquidity: (3) Central Bank: On February 21, the central bank conducted a 7-day reverse repo operation totaling 18.25 billion yuan through a fixed-rate and quantity bidding method, with an operating rate of 1.5%. (4) Money Market: Key repo rates for different terms were as follows: 1-day at 1.931%, 7-day at 2.139%, 14-day at 2.396%, and 1-month at 1.787%, with an overall upward trend in repo rates.

Market Factors: (5) Price Changes: The price changes for TS, TF, T, and TL were -0.25%、-0.40%、- 0.69% and -1.86%, respectively. (6) Price Spreads: The price spread changes for 4TS-T, 2TF-T, and 3TF- TS-T were 0.95¥, 0.27¥, and 0.71¥, respectively. (7) Net Basis Averages: The net basis averages for TS, TF, T, and TL were 0.043¥、0.207¥、0.078¥ and -0.204¥, respectively.

■ Strategy

Unilateral: Government bond futures prices fluctuate, and liquidity decreases, 2503 contract nuetral.

Arbitrage: Pay attention to the widening basis.

Hedging: Mid-term adjustment pressures persist, and short positions can use longer-dated contracts for moderate hedging.

■ Risk
Attention with liquidity tightening risk.

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