Group 1 - The core viewpoint of the article indicates that the bond market is experiencing a supportive environment due to a generally loose liquidity situation, despite a recent net withdrawal by the central bank [1] - The 30-year main contract for treasury futures rose by 0.13%, and the yield on the 30-year treasury bond decreased by nearly 2 basis points [1] - The upcoming reserve requirement ratio (RRR) cut on the 15th is expected to further support the bond market, with the 10-year treasury yield likely facing an adjustment ceiling around 1.7% [1] Group 2 - The recent inflow into the government bond ETF (511520) exceeded 1.8 billion, bringing its total scale to over 46.4 billion, making it the largest bond ETF in the market [1] - The government bond ETF has a duration of approximately 7.5 years, offering good liquidity and serving as a useful tool for bond market trading and allocation [1] - Related products include the government bond ETF (511520) and various classes of the Fortune China Bond 7-10 Year Policy Financial Bond ETF [1]

1. Report Industry Investment Rating No relevant information provided. 2. Core Viewpoints of the Report - Insurance institutions have been reducing their holdings of bank capital bonds since Q2 2024, and this behavior is not the decisive factor for the trend of bank capital bonds. Instead, fund and other trading - type institutions play a key role in determining the credit spread trend of bank capital bonds [1][3][49] - 4 - 5 - year large - bank capital bonds still have certain cost - effectiveness and can be bought during price adjustments, as there is potential for spread compression and they can provide good coupon income [5] 3. Summary According to the Table of Contents 3.1 Recent Reasons for Insurance's Net Selling of Bank Capital Bonds 3.1.1 Changes in Insurance Allocation Behavior Since Q2 2024 - From 2021 - 2023, insurance institutions significantly increased their holdings of bank capital bonds, with secondary - market net purchases of about 148.1 billion, 222.3 billion, and 396.5 billion yuan respectively. However, since Q2 2024, they have shifted to net selling, with quarterly net sales of 5 - 7.5 billion yuan from Q2 - Q4 2024. In 2025, they had a small net purchase of 1.12 billion yuan in Q1 and a net sale of 5.57 billion yuan in April [11] - Insurance institutions, as typical allocation - based investors, usually buy when prices are down and sell when prices are up. Generally, the scale of their daily net purchases of other types of bonds (mainly bank capital bonds) is positively correlated with the credit spread of 5Y AAA - second - tier capital bonds. But since Q4 2023, this correlation has been negative in some periods [12] - The reasons for continuous reduction and reverse operations may be: the decreasing yield of bank capital bonds in recent years, making their relative cost - effectiveness low; sufficient supply of local government bonds, leading insurance institutions to prefer them; and under the new accounting standards, insurance institutions are more cautious about bank capital bonds due to high valuation volatility [18][22][33] 3.1.2 Insurance's Reduction in April May Be Due to a Combination of Cost - effectiveness and Valuation Stability Considerations - Since March, insurance has had a weak willingness to allocate bank capital bonds, especially with continuous large - scale reductions since mid - to late March. However, the recovery of bank capital bonds was not strong, and it was abnormal to sell on the basis of cost - effectiveness alone [2][39] - In April, there were many uncertainties such as tariff, fundamentals, and policies. To avoid account valuation fluctuations, insurance reduced bank capital bonds and increased the allocation of interest - rate bonds and inter - bank certificates of deposit [2][40] - In April, the issuance scale of state - owned and joint - stock bank capital bonds increased significantly, and some insurance institutions may have "sold short - term bonds and bought long - term bonds" [43] 3.2 Insurance Allocation Behavior Does Not Determine the Trend of Bank Capital Bonds - The motives for insurance institutions to reduce bank capital bonds still exist: the spread center of long - term large - bank capital bonds is unlikely to rise systematically; local government bond supply is unlikely to shrink; and all insurance companies will implement new accounting standards in early 2026 [3][47] - The impact of insurance institutions' reduction on the bank capital bond market may be limited. Currently, their holding scale is small, and they usually adopt a passive allocation strategy of buying more when prices fall, which can play a "stabilizer" role but has little impact on the market trend. Fund and other trading - type institutions are the decisive factors for the credit spread trend of bank capital bonds [47][49] 3.3 4 - 5 - Year Large - Bank Capital Bonds Should Be Bought During Price Adjustments - There is no need to overly worry about insurance institutions' reduction of bank capital bonds. Their holding scale is limited, and they are not the main price - setters. In the medium - to long - term, the reduction in insurance demand and the rectification of bank wealth management's net - value smoothing methods will affect the spread center of bank capital bonds [53] - Comparing the credit spread quantiles of bank second - tier capital bonds in 2025 (January - April) and 2024, the spread centers of 1 - 3Y large - bank capital bonds and 1Y small - and medium - bank capital bonds are similar, while those of 4 - 5 - year large - bank capital bonds and medium - to long - term small - and medium - bank capital bonds have increased to varying degrees [54] - 4 - 5 - year large - bank capital bonds have cost - effectiveness. With the implementation of reserve requirement ratio cuts and interest rate cuts and the progress of Sino - US negotiations, fundamentals may become the focus of market speculation. Currently, with stable funding rates, compressing spreads may be a dominant strategy. As of May 13, 2025, the yield of 4 - 5 - year large - bank capital bonds is around 1.95%, and there is still about 8 - 16bp of spread compression space compared with the 1/4 quantile in 2024 [5][56]