CITIC Securities: It is expected that the probability of an RRR cut in the second quarter of 2026 is high.

CITIC Securities research report stated that, reviewing the January 2026 central bank policy statements, the expectation is for management priorities to be higher. Given that the cost of reserve requirement ratio reduction is lower than that of expanding the balance sheet, against the backdrop of narrowing net interest margins and expected pressure from government bond issuance in the first half of the year, in order to ensure that banks can take on the task, we expect a high probability of reserve requirement ratio reduction in the second quarter of 2026. After targeted interest rate cuts are implemented, the pace of overall interest rate cuts will focus more on inflation. We expect inflation to be differentiated in 2026, with the first half of the year being weaker and overall lower than the second half. In the bond market, short-term outlook is dependent on sentiment, medium-term outlook is dependent on monetary policy, and long-term outlook is dependent on inflation. There may be a bias towards stronger volatility leading up to the Spring Festival, and after the festival, attention will shift to variables related to the two sessions. There is upward risk for long-term interest rates.