10-year government bond yield drops to 1.704%, bond market trading logic returns to fundamentals.

Recently, the bullish sentiment in the bond market has continued to rise, with the long and ultra-long end yields breaking through key levels consecutively. On June 1st, the yield on the 10-year active bond briefly fell to 1.704%, a new low for the year; the yield on the 30-year special bond fell below the 2.2% level intraday, hitting a low of 2.1875%, and the rally in the ultra-long bonds further unfolded. Many institutional experts believe that the recent strength in the bond market is not only driven by loose liquidity, but also related to changes in fundamental expectations, weak credit demand, and increased institutional allocation power. As the bill rates continue to explore lows and the funding situation remains stable across months, the trading logic in the bond market is gradually shifting from focusing solely on institutional behavior back to fundamentals and financing needs.