Bank of China Asset Management announced that signs of economic growth slowdown and easing inflation pressure have provided a background for central banks around the world, especially in Europe and the United States, to gradually exit their tight monetary policies. This will create a favorable environment for bond markets in relevant regions. At the same time, as the Bank of Japan normalizes its policy, Japanese bond yields may face upward pressure more easily. Although policy shifts have historically been beneficial for bonds, the process will not be smooth sailing. The bank believes that the market will continue to be volatile, and investors should carefully examine economic data developments and ongoing geopolitical tensions. Recent economic data shows that despite some signs of slowing in the US economy, it remains stable. With strong consumer support, the US GDP grew at a rate of 3% in the second quarter and 2.8% in the third quarter. Additionally, while local manufacturing has been weak, the US Institute for Supply Management (ISM) and Purchasing Managers' Index (PMI) data both show positive trends in the local service industry. Meanwhile, although the unemployment rate in November rose slightly to 4.2%, non-farm employment numbers and average hourly wages both exceeded expectations, reflecting the resilience of the labor market. Furthermore, the easing inflation pressure locally has provided the Federal Reserve with a background for gradually exiting its tight monetary policy. Following a 50 basis point rate cut in September 2024, the Fed cut rates by 25 basis points in November. However, market expectations for continued rate cuts by the Fed in the future have diminished, mainly due to the re-election of Trump as President (Trump 2.0). Trump 2.0, along with Republican control of both houses of Congress, has increased uncertainty in US policy prospects. While new tax cuts and possible relaxation of regulations under a unified government may offset each other, Trump's proposed stricter immigration policies and tariffs may lead to a slowdown in growth. If new tariff policies are implemented, inflation may rise, potentially causing the Fed to delay returning to a neutral policy stance, although the overall impact on the neutral policy rate remains unclear for now. At a press conference after the November Federal Open Market Committee (FOMC) meeting, Fed Chair Powell emphasized that the federal funds rate is still far above the neutral rate. Additionally, some economic models such as the Holston-Laubach-Williams and Laubach-Williams models estimate the real neutral rate to be around 3% under a 2% inflation assumption. Moreover, the Fed's dot plot from September showed that Fed officials estimate the median long-term policy rate to reach 2.875%. Based on this data, barring any major unexpected events, Fed's view on further rate cuts in the future has been reinforced. In fact, by late November, the CME Group's FedWatch tool showed that market participants believed there was more than a 40% chance of the Fed keeping rates unchanged in December, with expectations for a 25 basis point rate cut exceeding 90%, indicating that a rate cut has almost become the market consensus again. Since the Fed's first rate cut in September, US Treasury yields have rebounded from lows, a departure from past trends after rate cuts. Considering the Fed's expected implementation of further accommodative policies in the future, the bank estimates limited upward potential for short- to medium-term bond yields. However, facing continued expansion of the US budget deficit, the US Treasury announced an increase in bond auction sizes. Since mid-2023, US Treasury issuances have exceeded $300 billion each quarter. Therefore, long-term bond yields may experience more volatile trends in the future. As for the credit market, the bank continues to maintain a cautious attitude, as current valuations seem to underestimate the risks of potential economic downturns and geopolitical uncertainties. Prudent credit screening and flexible management of maturities will be key in controlling risks in bond investment portfolios.