1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In 2026, the government bond supply in January showed a return to front - loaded efforts, with increased issuance volume and a longer - term structure. The incremental supply mainly came from local bonds. The overall supply pressure in the first quarter remained high, with front - loaded rhythm and longer duration characteristics. The core of the phased impact was the increase in supply concentration and the rise in the proportion of ultra - long - term bonds. Although the primary market enthusiasm for bonds has limited recovery, the carrying capacity is temporarily stable, and the issuance and carrying environment will improve with the return of potential allocation forces. Attention should be paid to the micro - situation's impact on primary pricing and secondary sentiment in the short term, and the demand change trend of the term structure under the normal state of high supply in the medium term [2][4][30]. 3. Summary According to the Directory 1. January Government Bond Supply: Return of Front - Loaded Efforts and Longer Issuance Terms - **Scale and Rhythm**: In January 2026, the government bond issuance volume increased significantly compared to the same period last year, with a front - loaded trend. The total net financing was about 115.619 billion yuan, of which local bond net financing was about 72.944 billion yuan, contributing most of the incremental supply. Compared with the average level from 2020 to 2024, the net financing in January 2026 was slightly higher [9]. - **Term Structure**: In January 2026, the supply of treasury bonds showed an overall increase in all terms, with the medium - and long - term becoming the main increment. The proportion of 30 - year treasury bonds in the total issuance continued to decline. For local bonds, the issuance scale increased significantly year - on - year, the proportion of ultra - long - term bonds remained stable, and the weighted term increased from 16.4 years to 17.7 years, indicating that the market carrying pressure was more concentrated on 30 - year ultra - long - term varieties [10][12]. - **Issuance Tendering**: In January 2026, the issuance of local bonds remained stable, but the intensity of capital participation declined. The overall multiple of local bond issuance tenders decreased, and the issuance relied more on passive funds. The spread between local bonds and treasury bonds converged, indicating that the supply - demand relationship of local ultra - long - term bonds remained relatively stable [13][15]. 2. Outlook for the First Quarter: The Duration Pressure on the Supply Side Needs to be Re - balanced - **Issuance Plan**: In 2026, the total government bond supply will remain high. The net financing of treasury bonds in the first quarter is expected to be in the range of 50 - 150 billion yuan, and the net financing of local bonds is expected to be 245 - 247 billion yuan per quarter. The issuance intensity of treasury bonds is adjusted through single - period scale, and attention should be paid to the planned scale of the 2 - year treasury bond issued on February 4. The expected issuance scale of local bonds from January to March is about 244 billion yuan, with a front - high and back - low net financing characteristic. The subsequent local bonds may continue the high - duration issuance feature, and the demand side will be under continuous pressure [16][18]. - **Institutional Demand**: The equity allocation of insurance funds has a phased squeezing effect on the ultra - long - term, but there is marginal repair space. The allocation of insurance funds to ultra - long - term local bonds has strong seasonality, and the buying intensity usually recovers gradually during the year. The expansion of the insurance liability side provides a basis for subsequent bond allocation. The potential expansion space of the insurance side can support the subsequent ultra - long - term supply [20][23]. - **Spread Comparison**: Since January 2026, the pricing of ultra - long - term local bonds has shown the characteristics of spread convergence and stable repair of issuance interest rates. The deviation between the issuance interest rate and the secondary market yield of 30 - year local bonds has narrowed, and the spread between local bonds and treasury bonds has fallen back to the historical average range, indicating that the supply - demand relationship is gradually re - balanced [26]. - **Policy Tone**: The 2026 fiscal policy continues to be more proactive, with high - intensity in total amount, more focused in structure, stronger efficiency orientation, and parallel debt reduction and development. Attention should be paid to the implementation rhythm and structure of fiscal incremental arrangements and the subsequent issuance plan [27].

Core Viewpoint - The Chinese government is implementing a more proactive fiscal policy for 2025, with a deficit rate set at around 4%, an increase of 1 percentage point from the previous year, aimed at promoting sustainable economic and social development [1] Group 1: Fiscal Policy Measures - The deficit rate for 2025 is planned at approximately 4%, which is a 1 percentage point increase compared to the previous year [1] - The new government debt scale is set at 11.86 trillion yuan, an increase of 2.9 trillion yuan from the previous year, significantly exceeding the average levels of recent years [1] - A special government bond issuance of 500 billion yuan is planned to supplement the core tier one capital of large state-owned commercial banks, enhancing the banking sector's ability to support the real economy [1] Group 2: Local Government Support - A limit of 500 billion yuan is arranged for local government debt to enhance their overall financial capacity and expand effective investment [1] - Despite the increase in deficit and government bond scale for 2025, China's government debt ratio remains low compared to the average levels of G20 countries [1]

Core Viewpoint - The Chinese government is increasing its fiscal deficit and government debt to promote high-quality economic and social development, with a projected deficit rate of around 4% for 2025, which is an increase of 1 percentage point from the previous year [1] Fiscal Policy - The Ministry of Finance announced a new government debt scale of 11.86 trillion yuan, which is an increase of 2.9 trillion yuan compared to the previous year [1] - The current fiscal measures are significantly higher than the average levels seen in recent years [1] International Comparison - Despite the increase in deficit and government bond scale, China's government debt ratio remains low compared to the average level of G20 countries [1]

Core Viewpoint - The Chinese government will continue to implement a more proactive fiscal policy in 2026, focusing on increasing total expenditure, optimizing structure, improving efficiency, and enhancing momentum [1][4]. Fiscal Policy Overview - The fiscal deficit, total debt scale, and total expenditure will maintain necessary levels in 2026, ensuring that overall expenditure increases and key areas are strongly supported [1][3]. - The fiscal deficit rate for 2025 is set at around 4%, an increase of 1 percentage point from the previous year, with new government debt reaching 11.86 trillion yuan, an increase of 2.9 trillion yuan compared to the previous year [3][4]. Strategic Focus Areas - The fiscal policy will play a crucial role in boosting consumption and expanding effective investment [4]. - The 2025 National Fiscal Work Conference emphasized the need to expand the fiscal expenditure pool and ensure necessary expenditure while optimizing the expenditure structure and enhancing support for key areas [4]. Investment Direction - The fiscal expenditure structure will continue to be optimized, with a focus on supporting major national strategies and directing more resources towards people's livelihoods and key sectors [5]. - Government bond funds will prioritize improving people's livelihoods, expanding domestic demand, and enhancing future growth, particularly in areas such as urban renewal and manufacturing upgrades [5]. Expected Fiscal Metrics - The expected fiscal deficit for the current year is approximately 5.9 trillion yuan, an increase of about 200 billion yuan from the previous year, primarily borne by the central government [5]. - The issuance of special long-term government bonds is projected to be 1.5 trillion yuan, an increase of 200 billion yuan from the previous year, to support key projects [5].

1. Report Industry Investment Rating No information about the industry investment rating is provided in the report. 2. Core Viewpoints of the Report - Based on various fiscal announcements, the report calculates the supply of government bonds and ultra - long bonds in Q1 2026 and interprets the key points of market - concerned supply [8]. - It analyzes the characteristics of government bond issuance in Q1 2026, including the situation of treasury bonds, local bonds, and makes supply forecasts [1][3][9]. 3. Summary According to the Directory 3.1 Treasury Bonds: In Q1, the number of issuances changes little, the single - issue scale rises and then falls, and there is room for acceleration in the future 3.1.1 Q1 Treasury Bond Plan: The number of issuances changes little, and 30y bonds use new codes - The number of treasury bond issuances in Q1 2026 is similar to that in the same period of 2025, with the number of coupon - bearing treasury bonds and savings bonds of each term remaining the same as in Q1 2025, and an additional 3M discount treasury bond issued in March 2026. The 50 - year treasury bond is postponed from February to March [9]. - 30y treasury bonds will use new codes. After the announcement, 250002 performed weakly, and 2500006 may continue to be the active bond in the short term. There is a risk of failure in the coupon - bond replacement of 30y ordinary treasury bonds [10]. 3.1.2 Single - issue Scale of Key - term Treasury Bonds: It rises first and then falls, and there may still be room for acceleration in the future - In January 2026, the single - issue scale of 2 - year and 10 - year coupon - bearing treasury bonds increased significantly compared with the same period in 2025, which may be due to high maturity pressure, the need to form physical workloads earlier, and to make way for the issuance of special treasury bonds [15][16]. - The single - issue scale of 1 - year treasury bonds later decreased to 135 billion. If the issuance speed of 135 billion continues, the monthly average may be around 150 billion, which is in line with the neutral issuance speed under a 4% deficit rate. To catch up with the net financing progress in 2025 in Q1, the quarterly average single - issue scale of key - term treasury bonds needs to reach 170 billion, indicating room for acceleration [18][19]. - Treasury bonds can use the remaining quota for issuance expansion before the Two Sessions. The remaining quota at the beginning of 2026 is expected to be around 580 billion, providing room for expansion [23]. 3.1.3 The quota of ultra - long special treasury bonds is pre - allocated but issued later - No special treasury bonds are scheduled for issuance in Q1. Ultra - long special treasury bonds show the characteristic of "quota pre - allocation but issuance postponement". The "Two - New" quota in 2026 is pre - allocated in a reduced scale but earlier, while the "Two - Important" quota is pre - allocated in a larger scale but later [25][29][30]. 3.2 Local Bonds: In Q1, the issuance scale is similar to that in the same period of 2025, the rhythm is earlier, and the terms vary across regions 3.2.1 Q1 Local Bond Plan: The issuance scale is basically the same as that in Q1 2025, and the supply is more concentrated in January - The planned issuance scale of the regions that have released plans is close to that in the same period of 2025. Affected by the Spring Festival shift, the issuance in January 2026 increased significantly compared with the same period in 2025 [31][32]. 3.2.2 Terms: Different regions show differentiation, and term shortening is not yet a general phenomenon - Regions with significantly shortened terms include Guangxi and Zhejiang, which do not arrange the issuance of 30y varieties and increase 10 - 20y varieties [32]. - Regions with little change in terms include Beijing and Shandong. Beijing's new special bonds still cover the full range of 1 - 30y terms, and Shandong's weighted average term is similar to that in Q1 2025 [33]. - Regions with significantly extended terms include Qingdao, which added 30y varieties that were not issued in 2025 [33]. 3.3 Q1 Supply Forecast: It is expected that the net financing of government bonds will be 3.6 trillion, and the issuance of ultra - long bonds will be 1.3 - 1.65 trillion 3.3.1 Government Bond Supply Forecast: The Q1 net financing is 3.6 trillion, including 2.15 trillion local bonds and 1.46 trillion treasury bonds - Local bonds: The net financing in Q1 may be around 2.15 trillion, with January and March being the supply peaks. The net financing in January, February, and March is expected to be 830 billion, 490 billion, and 840 billion respectively [38]. - Treasury bonds: The net financing in Q1 may be around 1.46 trillion. The single - issue scale of key - term treasury bonds is assumed to be 135 billion for the remaining 3 issues in January, rising to 175 billion in February, and around 190 billion in March due to high maturity pressure [39]. 3.3.2 Ultra - long Bond Supply Forecast: The issuance in Q1 is 1.4 - 1.77 trillion, including 11.6 billion treasury bonds and 1.3 - 1.65 trillion local bonds - Ultra - long treasury bonds: The issuance in Q1 may be around 11.6 billion, with 32 billion, 32 billion, and 52 billion issued in January, February, and March respectively [42]. - Ultra - long local bonds: The issuance in Q1 may be 1.3 - 1.65 trillion, with different issuance scales calculated according to different reference term structures [43].

Revenue and Expenditure Trends - In November 2025, the national general public budget revenue showed a year-on-year growth of -0.02%, down from 3.2% previously, indicating a significant slowdown in revenue growth due to economic fundamentals[1] - The national general public budget expenditure in November 2025 decreased by 3.7% year-on-year, an improvement from the previous decline of 9.8%[1] - The broad fiscal budget revenue completion rate for January to November 2025 was 85.3%, with a monthly year-on-year decline of 5.2% in November, higher than the same period in 2024[2] Tax Revenue Insights - Tax revenue in November 2025 was 11,450 billion yuan, with a year-on-year growth of 2.8%, while non-tax revenue was 2,576 billion yuan, showing a decline of 10.8%[3] - The corporate income tax turned negative, reflecting a broader economic slowdown, while personal income tax maintained a high growth rate, partly due to enhanced tax collection efforts[4] Government Fund Budget Analysis - The government fund budget revenue in November 2025 decreased by 15.8% year-on-year, an improvement from the previous decline of 18.4%, primarily due to reduced land transfer income[7] - Government fund budget expenditure in November 2025 increased by 2.8% year-on-year, recovering from a previous decline of 38.2%, attributed to accelerated project funding[8] Future Fiscal Outlook - For 2026, there is a potential for a slight increase in the deficit ratio, estimated between 4.0% and 4.2%, corresponding to a deficit scale of approximately 5.89 trillion to 6.19 trillion yuan[3] - The broad fiscal deficit scale is projected to be around 11.79 trillion to 12.09 trillion yuan, with local special bonds estimated at about 4.4 trillion yuan[3]

1. Report Industry Investment Rating No information provided in the content. 2. Core Viewpoints of the Report - Fiscal policy is expected to remain proactive next year, with a moderately increased intensity. The deficit-to-GDP ratio is expected to be 4% in 2026, and the net supply of government bonds is projected to reach 15.2 trillion yuan, an increase of about 820 billion yuan compared to 2025. The front-loading degree of fiscal policy implementation may moderate compared to this year [2][11][42]. - For the bond market, the fiscal policy is likely to provide a measured boost rather than strong stimulus, so a significant market adjustment driven by fiscal expansion is unlikely. However, attention should be paid to potential volatility caused by market speculation about further policy escalation. The pressure from government bond supply is likely to be manageable, and the impact may mainly manifest in the term structure, maintaining a steepening yield curve [3][4]. 3. Summary According to the Table of Contents Proactive Fiscal Policy Stone - The central government's stance on macro policy is relatively proactive. The "Recommendations for the 15th Five - Year Plan" emphasizes strengthening counter - and cross - cyclical adjustments and implementing more proactive macro policies, as well as leveraging the role of proactive fiscal policy to improve fiscal sustainability [12][43]. Moderate Expansion of Fiscal Policy 2.1 The Economy is generally better than the same period last year - Domestic demand continues its moderate recovery. The GDP growth rate for the first three quarters of this year was better than the same period last year (5.2% vs. 4.8%), and the inflation readings are overall better than last year. Consumer confidence has been warming up from low levels. The necessity for a significant marginal increase in fiscal policy intensity in 2026 is likely not high [13][43]. - Tariff risks have marginally diminished. The US side will cancel the 10 - percent "fentanyl tariffs" and suspend the 24 - percent reciprocal tariffs on Chinese goods for an additional year. The trade situation may have eased compared to the same period last year [14][44]. 2.2 Estimated Treasury Bond Net Financing: 7.08 tn Yuan, + 420 bn Yuan - The targeted deficit - to - GDP ratio is expected to be 4%, corresponding to a deficit scale of approximately 5.88 trillion yuan. The main entity for increasing leverage is likely to be the central government, with a targeted deficit of 5.08 trillion yuan, while local governments' target deficit is expected to remain flat at 80 billion yuan [14][47]. - The issuance of ultra - long - term special treasury bonds is expected to total 1.6 trillion yuan, and the scale of special treasury bonds for capital injection into central financial institutions is projected to be 40 billion yuan. The total issuance scale of special treasury bonds in 2026 is estimated to reach 2 trillion yuan. The net financing of treasury bonds in 2026 is projected to be 7.08 trillion yuan, an increase of 42 billion yuan YoY [15][47][48]. 2.3 Estimated Local Government Bond Net Financing: at 8.1 tn Yuan, + 400 bn Yuan - The scale of local government bonds is projected to reach 5.6 trillion yuan in 2026. The targeted local government deficit is expected to remain unchanged at 80 billion yuan, and the scale of special - purpose bonds is anticipated to increase to 4.8 trillion yuan. An additional 50 billion yuan from the unused bond quota may be allocated next year. The net financing of local government bonds is projected to reach approximately 8.1 trillion yuan, an increase of 40 billion yuan compared to the current year [29][64]. - Overall, the net financing scale of government bonds is projected to reach 15.2 trillion yuan in 2026, an increase of approximately 82 billion yuan compared to the current year [30][64]. Optimized Expenditure Structure: Investing in People - During the "15th Five - Year Plan" period, fiscal policy will continue to focus on people's livelihood, optimizing the expenditure structure and increasing the proportion of spending on livelihood - related projects [38][71]. Less Front - loaded Implementation of Fiscal Policy - Fiscal policy support in 2026 is expected to remain front - loaded, but the degree of front - loading may be reduced. The utilization of 50 billion yuan in new policy - oriented financial tools and idle fiscal deposits may bolster the economic fundamentals at the end of this year and early next year. The U.S. mid - term elections in the second half of 2026 could reignite tariff risks, necessitating reserved policy space for response measures [39][72].

Core Viewpoint - The chief economist of Guangdong Securities, Luo Zhiheng, emphasizes the need for a more proactive fiscal policy, with a projected deficit rate of no less than 4% and an increase in the scale of new debt [1] Fiscal Policy and Spending - There is a call for guaranteed intensity in fiscal spending, indicating a shift in focus from investment to a balanced approach between investment and consumption [1] - The structure of fiscal spending is expected to optimize, moving from an emphasis on supply to a balance between supply and demand, and from focusing solely on enterprises to also considering households [1] Social Welfare and Support - The fiscal policy aims to further tilt towards residents and social welfare, with plans to increase childcare subsidies, extend the free years of preschool education, and enhance urban and rural residents' pensions [1] - The goal is to repair the balance sheets of households, indicating a focus on improving the financial health of the population [1]

Summary of Key Points from Conference Call Records Industry Overview - The records primarily discuss the macroeconomic outlook for China and Japan, focusing on fiscal revenue and monetary policy implications for 2026 [1][2][3][4][5][8][10]. Key Insights and Arguments 1. **China's Fiscal Revenue Outlook for 2026**: - China's broad fiscal revenue is expected to stabilize and increase, driven by stable macro tax burdens, anti-involution policies, performance of special taxes, and enhanced tax collection measures [1][2][3][4]. - The overall fiscal revenue is projected to show uncertainty but trend towards stability [4]. 2. **Factors Influencing China's Fiscal Revenue**: - **Stable Macro Tax Burden**: Emphasis on maintaining a reasonable macro tax burden and regulating tax incentives to address the ongoing decline in macro tax levels [3]. - **Anti-Involution Policies**: These policies are anticipated to help improve prices in 2026, particularly benefiting domestic value-added tax revenues from manufacturing and wholesale sectors [3]. - **Performance of Special Taxes**: The shift towards domestic demand may reduce the drag from export tax refunds, while higher trading volumes in the securities market could enhance stamp duty contributions [3]. - **Strengthened Tax Collection Measures**: Increased coverage and regulation of personal income tax and compliance requirements for local government investment incentives are expected to improve fiscal stability [3]. 3. **Japan's Economic Stimulus and Fiscal Challenges**: - Japan's government has introduced a ¥21.3 trillion economic stimulus plan, primarily targeting inflation and social subsidies, which is expected to raise the fiscal deficit to 3.0% in 2026 [1][8]. - The effectiveness of Japan's fiscal expansion is anticipated to be weaker compared to the U.S. and Germany, with a projected GDP impact of only 0.5 percentage points [8][9]. 4. **Market Risks and Volatility**: - The combination of fiscal expansion and monetary tightening in Japan has raised risks of a reversal in yen carry trades, particularly as the Bank of Japan shifts towards a hawkish stance [8][10]. - Current market conditions show a balanced position in yen trading, with net long positions emerging, indicating a more stable environment compared to previous extremes [11][12]. 5. **U.S. Economic Data and Implications**: - Recent U.S. economic data, including a decline in ADP employment figures and stagnant PCE consumption growth, suggest a weakening labor market and potential for a rate cut by the Federal Reserve in December [7]. Other Important but Overlooked Content - The records highlight the importance of monitoring the interplay between U.S. and Japanese monetary policies, particularly during periods of contrasting stances, which could create volatility in the markets [10]. - The potential for Japan's fiscal measures to lead to increased inflationary pressures, despite initial subsidies aimed at reducing costs, is a critical consideration for future economic stability [9][12].

Summary of Conference Call Notes Industry Overview - The current market presents a favorable configuration window, with the 10-year government bond yield rising to approximately 1.83%, which is considered a safe protection point. Attention should be paid to the buying levels of rural financial institutions at year-end, as this will determine whether a wave of configuration will start [1][3][4]. Key Points and Arguments - **Fiscal Policy Outlook for 2026**: The fiscal policy is expected to maintain a positive tone, with a deficit rate around 4%. The government bond issuance is projected to be approximately 5 trillion RMB, with total government funding needs increasing by about 1.3 trillion RMB compared to this year [1][5]. - **Government Support**: The fiscal support from government departments is anticipated to rise from about 68% in 2025 to 70.5% in 2026, indicating an upward trend despite a slowdown in growth [1][9]. - **Bond Issuance Plans**: The issuance of ordinary government bonds is expected to reach 7.1 trillion RMB in 2026, with local debt totaling around 7.5 trillion RMB. The financing pace in the first quarter is expected to be rapid, necessitating attention to supply pressure [1][10]. - **Investment Strategies**: Recommended strategies include focusing on 7-10 year government bonds and 3-5 year varieties, as well as 10-year government bonds, which are seen as having good cost-performance ratios. Specific recommended products include short-term 3-5 year government bonds and 30-year old government bonds [1][6]. - **Market Conditions**: The current market has a high win rate but limited odds, suggesting a gradual accumulation strategy for next year's coupon income. Monitoring the buying behavior of rural financial institutions is crucial for timely adjustments to investment strategies [1][7][8]. Additional Important Insights - **Credit Market Performance**: The credit bond market is currently weak, but liquidity in credit bond ETFs is good, with opportunities in 4-5 year and long-term credit bonds. The final version of the fund fee rate regulations should also be monitored [2][15][16]. - **Future Credit Market Trends**: The credit market may enter a year-end configuration period from late November to early December, with a focus on institutional allocation behavior changes. The current environment is seen as a good window for accumulating coupon assets [17]. - **Local Government Debt**: Recent developments indicate a significant reduction in hidden debts in Jilin Province, with a nearly 90% decrease in stock hidden debt and over 70% reduction in financing platforms. This aligns with market expectations and suggests potential regional development opportunities [20]. This summary encapsulates the key insights and projections from the conference call, providing a comprehensive overview of the current state and future outlook of the bond and credit markets.