The nomination of the Federal Reserve Chair triggered a reevaluation of expectations, causing long-term US Treasury yields to rise immediately.

Last week (January 26, 2026 - January 30, 2026), $ChinaAMC Select Fixed Income Allocation Fund (HK0000439627.MF)$ performance remained robust, with the net value of the US dollar share rising by 14 bps and that of the Hong Kong dollar share increasing by 27 bps. As the Fed entered a wait-and-see period regarding rate cuts, uncertainty from the nomination of a new chair put downward pressure on long-term US Treasury yields. However, by concentrating on short-duration, low-beta assets with predictable returns, this fund effectively isolated itself from volatility in long-term interest rates, demonstrating strong defensive characteristics in a fluctuating market environment.

In terms of macroeconomic data, China’s economy continues to stabilize and improve. In 2025, profits of industrial enterprises above designated size increased by 0.6% year-over-year, marking the first positive growth in four years. Internationally, on January 28, the Federal Reserve decided to maintain the interest rate within the range of 3.50%-3.75%, ending three consecutive rate cuts and entering a wait-and-see phase. Additionally, the final annualized QoQ GDP for Q3 in the United States was 4.4%, with core PCE inflation holding steady at 2.9%, indicating both economic resilience and ongoing inflationary pressures.

Regarding global interest rate movements, last week US Treasury yields showed a pronounced steepening trend, with short-term yields falling while long-term yields remained high. Influenced by the FOMC maintaining rates unchanged, Powell providing no forward guidance, and Trump nominating Kevin Warsh to succeed as Federal Reserve Chair, the yield curve steepened further. Yields across 2/5/7/10/30-year maturities changed relative to the prior Friday by -7/-4/-1/1/5bps respectively. In Japan, following the successful auction of 40-year bonds, demand for covering short positions and real money inflows helped ease sentiment, bringing the 40-year bond back down to 3.9%, while the 10-year yield stayed around 2.25%.

In the credit market this week, the spreads of Chinese investment-grade US dollar bonds remained largely flat with a slight widening of 1-2bps, showing significant divergence among sectors. The 10-year US dollar bonds of TMT sector companies such as Meituan, Kuaishou, and Alibaba all experienced a slight widening of 1-2bps; while AMC and leasing sectors saw active buying interest, with credit spreads for Cinda, Orient, and Far East Horizon US dollar bonds maturing between 2028-2029 narrowing by 1-2bps. Meanwhile, floating-rate bonds issued by Chinese banks and brokers continued to be in high demand, with spreads narrowing further by around 1bp.

Facing the Fed entering a wait-and-see period for rate cuts and weak global risk appetite, we will continue to adhere to a strategy of short duration and high liquidity, reinforcing downside protection through flexible cash management policies. At the same time, we will closely monitor the ongoing domestic pro-growth policies and external cooperation efforts to support the credit environment, seeking relatively certain potential returns through diversified asset allocation.

[Last Week's Macro Data Review] (January 26, 2026 - January 30, 2026)

Fed Interest Rate Decision: Maintained rates at 3.50%-3.75%, ending three consecutive rate cut cycles and entering a wait-and-see period.

China Industrial Enterprises' Profits: Grew 0.6% year-on-year in 2025, marking the first positive growth in four years; December alone saw a 5.3% increase.

[This Week’s Focus]

Domestic: China’s January PMI and subsequent implementation of pro-growth policies.

International: Geopolitical risks, US developments, and US January unemployment rate data.

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Data Source: Bloomberg, as of January 30, 2026.

Investment involves risks, including possible loss of principal. Past performance is not indicative of future fund returns. This document is for your reference only and does not constitute an offer or solicitation for the purchase or sale of any securities or funds, nor does it constitute any investment advice, nor is it prepared for any such offer. The publisher of this material is China AMC (HK) Limited. This material has not been reviewed by the Securities and Futures Commission of Hong Kong.

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