IN00331

<p>This 30-year mortgage rate cut of 80 basis points may lead to a decrease of around 20 basis points in the 30-year government bond yield. The market's expectations for the adjustment of mortgage rates have increased, focusing mainly on the impact of stimulating real estate policies on the economy, as well as the relative value changes in bank credit and bonds. Residents are facing the dilemma of declining asset yields and rising debt costs. The market supply and demand relationship affects the pace of policy interest rates, indicating that interest rate cuts may not boost property sales, with the key issue lying in insufficient demand for goods</p>

- Market expectations for adjustments in existing home loan interest rates have resurfaced, prompting bond market investors to consider various factors: 1) Stimulative real estate policies may boost economic prospects, impacting the bond market negatively; 2) From a bank credit-bond price perspective, adjusting existing home loan rates could enhance the relative value of bonds, especially long-term ones, benefiting the bond market; 3) The contradiction between the need for banks to reduce liabilities (MLF, OMO, deposit rates) and the control of long-term rates highlights the impact of this policy on the bond market's pace and structure. 
- The supply and demand of home loans determine interest rates, influencing monetary policy pace, rather than the other way around. Recent data suggests a decline in personal housing loan balances, potentially leading to early repayments and impacting the market. Understanding the dynamics of supply and demand in the housing loan market can help predict monetary policy trends. 
- Residents facing a significant decrease in asset returns compared to debt costs may shift from rational financial decisions to irrational risk aversion. The current scenario of asset-return inversion and the necessity for early debt repayment indicate a potential impact on the bond market, with implications for banks' asset quality and interest rate dynamics.

30-year mortgage vs. 30-year government bond