Key Points - The China Interbank Market Dealers Association announced the addition of 24 institutions qualified for underwriting non-financial corporate debt financing instruments, including 8 general lead underwriters and 15 underwriters [1] - The National Development and Reform Commission and the Ministry of Finance have allocated 62.5 billion yuan in special bonds to support the consumption of old goods, aiming to meet the demand for the upcoming New Year and Spring Festival [3] - The People's Bank of China conducted a 3.125 billion yuan reverse repurchase operation, resulting in a net injection of 253.2 billion yuan into the market [3] - The Henan Provincial Finance Department announced adjustments to the use of funds for 16 special bonds, with a total investment of 11.968 billion yuan [4] - The Tianjin Municipal Committee emphasized the need to accelerate the transformation and exit of financing platforms to effectively mitigate economic risks [5] - The Shandong Provincial Government has introduced measures to support state-owned enterprises in establishing industrial investment funds, encouraging investment in strategic emerging industries [5] - The Shandong Provincial Government Investment Management Measures prohibit local governments from illegally borrowing debt to fund government investment projects [6] - Four companies in Henan have been approved to register a total of 4.241 billion yuan in debt financing instruments [7] - Zhengzhou Urban Construction Group issued 500 million yuan in medium-term notes with a 5-year term and interest rates of 2.49% and 2.39% [9] - The Xinyang Shentou Operation Management Company plans to issue 1 billion yuan in corporate bonds, with Guosen Securities as the underwriter [11] - The Henan Cultural Tourism Investment Group signed a controlling acquisition agreement with Yimei International Travel Agency to strengthen their position in the inbound tourism market [12] - The Jiyuan Investment Group announced a non-compensatory transfer of 54.51 million shares of Henan Yuguang Gold Lead Co., Ltd., valued at 626 million yuan [14] - The China Securities Association released the results of the bond business quality evaluation, with 14 companies receiving an A rating [14] - The market outlook for 2026 indicates new characteristics in the bond market, including potential downward pressure on interest rates and a possible "dual bull" market scenario for stocks and bonds [20][21]

Core Viewpoint - The article discusses the expected trends and characteristics of the bond market in the first quarter of 2026, highlighting the influence of policy expectations, government bond issuance, and market dynamics on interest rates and investment strategies [1][2][3]. Summary by Sections Historical Context - The bond market in recent years has experienced varying trends driven by different factors: - 2020 saw rapid interest rate declines due to the pandemic and aggressive central bank easing - 2021 experienced a rise in rates due to a pre-Spring Festival liquidity crunch, followed by a decline as monetary policy remained stable - 2022 had initial rate cuts and a surge in credit, leading to fluctuating rates - 2023's strong recovery expectations were temporarily undermined, resulting in a similar pattern of rising and then falling rates - 2024 is expected to see a significant decline in rates due to an asset shortage, while 2025 may witness rising rates as the central bank tightens funding [1]. Expectations for Q1 2026 - The bond market in Q1 2026 is anticipated to share several characteristics with previous years: - There is unlikely to be a "black swan" event affecting the fundamentals, with a focus on policy expectations and bond issuance rhythm - Government bond issuance may slow compared to the accelerated pace of 2025, with net financing expected to account for about 25% of the annual total - The net financing scale for government bonds is projected to slightly increase from 14.4 trillion to 14.8 trillion, a 2% rise - The stock market may continue to exhibit a "spring rally," putting pressure on the bond market - The probability of a reserve requirement ratio cut is higher than that of an interest rate cut, with historical trends indicating that cuts in reserve requirements typically precede interest rate reductions [2][3]. New Features for 2026 - The bond market is expected to exhibit new features in 2026: - Monetary policy iterations may provide timely support through MLF, buyout methods, and government bond transactions, with low funding volatility anticipated - The demand for long-term bonds may weaken towards the end of 2025, but could rebound around the Spring Festival as new capital enters the market - There will be a continued divergence in growth efficiency between emerging and traditional economies, with new productivity sectors outpacing traditional sectors, potentially leading to a "dual bull" market in stocks and bonds in the short term - Overall, the bond market pressure is expected to be limited, with a "weak first, strong later" rhythm anticipated, and the 10-year government bond yield may face pressure before the Spring Festival, with an upper limit of 1.90-1.95% [3].

1. Report Industry Investment Rating - Not provided in the report 2. Report's Core View - In 2026, the economy may continue the weak recovery trend, with the old and new driving forces differentiating more significantly under the overall pressure. Infrastructure and real estate may continue to drag down the economy. The central bank will increase counter - cyclical and cross - cyclical adjustment, and the monetary policy will remain moderately loose, promoting the social comprehensive financing cost to run at a low level and promoting a reasonable recovery of prices. The probability of making long positions in the bond market is high, and the bond market in 2026 may perform better than expected [2][75]. 3. Summary by Relevant Catalogs 3.1 Macro News - In November, the total bond custody scale increased by 1.48 trillion yuan month - on - month to 178.2 trillion yuan. The increase was mainly due to the growth of the custody scale of national bonds and local government bonds, with commercial banks being the main buyers. Generalized funds mainly increased their holdings of financial bonds [2][8]. - The fourth - quarter regular meeting of the central bank's Monetary Policy Committee in 2025 emphasized increasing counter - cyclical and cross - cyclical adjustment, promoting a reasonable recovery of prices, and promoting the social comprehensive financing cost to run at a low level. The meeting removed the content related to small and micro - enterprise financing and real - estate market support [19]. - In November, the profits of industrial enterprises above the designated size decreased significantly year - on - year. From January to November, the total profits of industrial enterprises above the designated size reached 6.6 trillion yuan, a year - on - year increase of 0.1%. The profits of the mining industry decreased by 27.2%, the manufacturing industry increased by 5.0%, and the production and supply of electricity, heat, gas, and water increased by 8.4% [23]. - At the end of the third quarter of 2025, the total assets of China's financial institutions were 531.76 trillion yuan, a year - on - year increase of 8.7%. The total assets of the banking, securities, and insurance industries increased by 7.9%, 16.5%, and 15.4% respectively [26]. 3.2 Medium - term High - frequency Data 3.2.1 Consumption - As of December 21, the daily average retail volume of passenger cars decreased by 11.4% year - on - year, and the daily average wholesale volume decreased by 9.0% year - on - year. As of December 26, the total box office revenue in the past 7 days increased by 90.1% year - on - year. As of December 19, the total retail volume of three major household appliances decreased by 35.7% year - on - year, and the total retail sales decreased by 49.7% year - on - year [29][32]. 3.2.2 Transportation - As of December 21, the container throughput of ports increased by 6.6% year - on - year. As of December 26, the average subway passenger volume in first - tier cities increased by 3.2% year - on - year. The postal express collection volume increased by 0.1% year - on - year, the delivery volume increased by 1.7% year - on - year, the railway freight volume decreased by 2.0% year - on - year, and the highway truck traffic volume decreased by 0.6% year - on - year [35][39]. 3.2.3 Industrial Operating Rate - As of December 24, the blast furnace operating rate of major steel enterprises decreased by 0.1 percentage points year - on - year. As of December 25, the average asphalt operating rate decreased by 1.0 percentage points year - on - year. The soda ash operating rate increased by 2.3 percentage points year - on - year, and the PVC operating rate decreased by 1.8 percentage points year - on - year [42][44]. 3.2.4 Real Estate - As of December 26, the total commercial housing transaction area in 30 large - and medium - sized cities in the past 7 days decreased by 23.0% year - on - year. As of December 19, the second - hand housing transaction area in 9 sample cities decreased by 27.1% year - on - year [47][50]. 3.2.5 Prices - As of December 26, the average wholesale price of pork decreased by 22.2% year - on - year, the average wholesale price of vegetables increased by 13.6% year - on - year, and the average wholesale price of 6 key fruits increased by 8.4% year - on - year. The average price of thermal coal at northern ports decreased by 8.2% year - on - year, and the average spot price of WTI crude oil decreased by 16.9% year - on - year. The average spot price of rebar decreased by 3.5% year - on - year, the average spot price of iron ore increased by 2.2% year - on - year, and the average spot price of glass decreased by 20.3% year - on - year [54][58]. 3.3 Bond and Foreign Exchange Markets - On December 26, most money - market interest rates showed a downward trend. Most government bond yields also decreased. The yields of 1 - year, 5 - year, 10 - year, and 30 - year government bonds were 1.29%, 1.59%, 1.84%, and 2.22% respectively, down 7.0BP, 0.8BP, up 0.8BP, and down 0.3BP respectively compared with December 19. The yields of 1 - year, 5 - year, 10 - year, and 30 - year China Development Bank bonds were 1.52%, 1.79%, 1.98%, and 2.39% respectively, down 6.0BP, 0.6BP, up 1.1BP, and down 0.4BP respectively compared with December 19. The yields of 1 - year, 5 - year, and 10 - year local government bonds were 1.48%, 1.76%, and 2.04% respectively, down 5.2BP, 1.9BP, and 0.5BP respectively compared with December 19. The yields of 1 - month and 1 - year AAA and AA+ inter - bank certificates of deposit increased to varying degrees. As of December 23, the 10 - year government bond yields of the United States, Japan, the United Kingdom, and Germany were 4.18%, 2.04%, 4.51%, and 2.96% respectively, up 2BP, 2BP, 1BP, and down 2BP respectively compared with December 19. On December 26, the central parity rate and spot exchange rate of the US dollar against the RMB were 7.04 and 7.01 respectively, down 192 and 325 pips respectively compared with December 19 [61][65][70]. 3.4 Investment Suggestions - In 2026, the bond market may perform better than expected. It is expected that the policy interest rate will be cut by about 20BP in 2026, and a 10BP cut may occur in the first quarter. Currently, it is recommended to focus on the allocation value of 5 - year bank capital bonds and ultra - long - term interest - rate bonds [75][78].

Core Viewpoints - The bond market is currently under pressure due to fundamental challenges and a loose monetary environment, with concerns about supply-demand mismatches being a primary issue. However, there is an expectation for a temporary alleviation of these pressures in Q1 2026, leading to a potential downward trend in bond yields, possibly reaching a low for the year [4][8] - The market is characterized by a "strong expectation but weak reality" scenario, where economic performance is not aligning with financial market optimism. Despite a strong equity market, the underlying economic fundamentals remain weak, which could provide support for the bond market as expectations adjust [10] - The coordination between monetary and fiscal policies is expected to strengthen, with fiscal measures likely taking the lead and monetary policy providing support. This collaboration is crucial for maintaining a stable bond market environment [17][18] Group 1: Market Support Factors - **Support Factor One: Strong Expectation, Weak Reality** The economic performance is currently low, with insufficient effective demand impacting production. Historical trends show that equity market uptrends are usually linked to fundamental improvements, but this time, the equity market is rising despite ongoing downward pressures on the economy [10][11] - **Support Factor Two: Monetary and Fiscal Coordination** The fiscal policy is expected to be the main driver, with monetary policy acting in support. The issuance of government bonds is anticipated to be front-loaded in Q1 2026, with a focus on longer maturities, which will require careful coordination with monetary policy [17][18] - **Support Factor Three: Anticipation of Monetary Easing** There is an expectation for interest rate cuts and reserve requirement ratio reductions in Q1 2026, which could lead to a favorable environment for bond yields to decline. Historical patterns suggest that such easing typically occurs at least once a year [26][27] Group 2: Investment Strategy - **Investment Strategy: Combination of Short-Medium Term Credit Bonds and Long-Term Rate Bonds** A "barbell" strategy combining short to medium-term credit bonds with long-term rate bonds is recommended. Historical data indicates that a 10 basis point decline in the 10-year government bond yield is likely, which would favor long-term bonds despite their higher volatility [30][31] - **Perspective One: Historical Experience Reference** Based on historical data, the 10-year government bond yield is expected to decrease by approximately 10 basis points in Q1 2026, with long-term bonds showing strong performance but higher volatility compared to short to medium-term credit bonds [30][31] - **Perspective Two: Scenario Hypothesis Simulation** Assuming a 10 basis point decline in the 10-year government bond yield, the total returns for long-term bonds are expected to outperform, although they are less resilient to rising interest rates. In contrast, short to medium-term credit bonds are projected to provide better total returns with a stronger safety cushion [39][40]

1. Report Industry Investment Rating No information provided. 2. Core Viewpoints of the Report - In 2025, the bond market showed a pattern of "fast bull, slow bear, mainly oscillating", with the 10 - year Treasury bond yield fluctuating between 1.6% - 1.9%. The yield curve changed from bull - steep to bear - flat and then to bear - steep [2][9]. - In 2026, the yield curve is likely to maintain a relatively steep shape, with the short - end being prone to decline and the long - end difficult to fall. The probability of the curve remaining oscillating or slightly bull - steep is higher [3]. - In 2026, the riding strategy is a better choice than simply relying on duration extension. The 5 - year to 4 - year Treasury bond riding strategy is optimal on the current yield curve, with relatively controllable risks [4]. 3. Summary According to the Directory 3.1 1.行情回顾：债市“快牛慢熊”，曲线从牛陡走向熊陡 - In 2025, the bond market experienced a "fast bull, slow bear" and entered an oscillating market. The 10 - year Treasury bond yield oscillated between 1.6% - 1.9%. The short - term bond interest rate first rose and then fell during the year, and the yield curve changed from bull - steep to bear - flat and then to bear - steep [9]. - In Q1, long - term interest rates dropped significantly, short - term interest rates rebounded sharply, and the curve changed from bull - steep to bear - flat; in Q2, the bond market entered a sideways consolidation, and the curve remained relatively flat; in Q3, long - term bond yields rose significantly, short - term fluctuations were limited, and the curve changed from bear - flat to bear - steep; in Q4, the "bear - steep" of the curve was further strengthened [11]. 3.2 2.行情展望：排除长端大幅上行风险，曲线陡峭化或延续 3.2.1 2.1 曲线形态：短端易落长端难下，收益率曲线或延续陡峭 - After the bear - steep, there are three typical trends: bear - flat, bull - steep, and oscillation. In 2026, the curve is most likely to remain steep or slightly bull - steep, with a high probability of a structural differentiation pattern of "short - end decline, long - end oscillation" [14][15]. 3.2.2 2.2 四个约束：限制长端收益率大幅上行的因素 - ROIC: The central decline of ROIC in recent years restricts the significant upward movement of long - term Treasury bond yields [16][18]. - Long - term loan interest rate and long - term Treasury bond interest rate: The long - term loan interest rate is still falling, and the long - term Treasury bond yield is difficult to rise significantly [19]. - Stock - bond ratio: The current stock - bond ratio is in a neutral range, and if the bond yield rises significantly, it will enter the allocation value range [21]. - Asset - liability ratio: The spread between the liability costs of banks and insurance and the Treasury bond yields has been significantly eased, and the stabilizing effect of the allocation disk may suppress the significant upward movement of yields [23]. 3.3 3.利率策略：做陡曲线，骑乘策略或是最佳选择 3.3.1 3.1 策略选择：曲线偏陡背景下，骑乘优于单纯久期博弈 - In 2026, it is difficult to simply rely on duration extension to bet on interest rate decline. The riding strategy can obtain certain returns from the curve shape and is more suitable for the market characteristics of "low interest rate, low volatility, and dominated by curve structural changes" [25][28]. 3.3.2 3.2 策略思路：在陡峭曲线下，选择1年持有期的曲线凸点 - In the riding strategy, the 5 - year Treasury bond riding to the 4 - year is the optimal convex point on the current yield curve, which can obtain relatively certain structural returns while controlling risks [30][32]. 3.3.3 3.3 策略模拟：不同情景下骑乘目标收益测算与风险衡量 - Under the static curve assumption, the one - year target return of the 5 - year to 4 - year riding strategy is about 2.01%; under the bull - steep assumption, it can be increased to about 2.20%. The 5 - year riding strategy has a relatively thick risk cushion, and the risk is relatively controllable [34][35].

1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Report Core View The current economy may still be under pressure, with the core contradiction of economic operation focusing on "the co - existence of the drag from the adjustment of old growth drivers and the growth of new ones." The short - term pressure on consumption and investment corresponds to the low - growth trend of fiscal revenue and expenditure. The demand side may remain under pressure, and if consumption and investment continue to be weak, it may affect the Q4 economic growth rate, which is expected to slow down compared to Q3. The real estate market is still at the bottoming stage, and residents may maintain a cautious attitude towards consumption in the short term. The fiscal operation shows the characteristics of "low revenue growth and differentiated central and local expenditures." The economic and fiscal situation aligns with the policy deployment of the 2025 Central Economic Work Conference. The economy may show a weak recovery next year, and the pressure on fiscal revenue and expenditure balance may continue [2][85]. 3. Summary by Related Catalogs 3.1 Macro News - **Fiscal Revenue and Expenditure**: In the first 11 months of 2025, the national general public budget revenue was about 20.1 trillion yuan, with a year - on - year increase of 0.8%. In November, it was about 1.4 trillion yuan, a year - on - year decrease of 0.02%. The general public budget expenditure in November was 2.3 trillion yuan, a year - on - year decrease of 3.71%, with the decline narrowing by 6.07 pct compared to the previous month. Tax revenue in the first 11 months was about 16.5 trillion yuan, a year - on - year increase of 1.8%. In November, tax revenue increased by 2.8% year - on - year, while non - tax revenue decreased by 10.8% year - on - year, with the decline narrowing by 22.13 pct compared to the previous month. In terms of expenditure, central expenditure increased by 4.9% year - on - year in November, while local expenditure decreased by 5.1% [10][12][16]. - **Consumption, Investment, and Foreign Trade**: In November, the total retail sales of consumer goods were 4.4 trillion yuan, a year - on - year increase of 1.3%, with the growth rate dropping by 1.6 pct compared to the previous month. From January to November, fixed - asset investment decreased by 2.6% year - on - year. Infrastructure investment, manufacturing investment, and real estate development investment from January to November decreased by 1.1%, increased by 1.9%, and decreased by 15.9% respectively year - on - year. In November, the total import and export value was 3.9 trillion yuan, a year - on - year increase of 4.1%. Exports were 2.3 trillion yuan, a year - on - year increase of 5.7%, and imports were 1.6 trillion yuan, a year - on - year increase of 1.7% [22]. - **US Economic Data**: In November, the number of new non - farm jobs in the US increased by 64,000, higher than the Dow Jones expectation of 45,000. The CPI in November increased by 2.7% year - on - year, lower than the market expectation of 3.1%. The core CPI increased by 2.6% year - on - year, the lowest level since early 2021 and also lower than the market expectation of 3% [26]. 3.2 Meso - level High - frequency Data - **Consumption**: As of December 14, the average daily retail volume of passenger car manufacturers was 67,000 vehicles, a year - on - year decrease of 16.8%, and the average daily wholesale volume was 62,000 vehicles, a year - on - year decrease of 22.4%. As of December 5, the total retail volume of three major household appliances was 784,000 units, a year - on - year decrease of 24.7%, and the total retail sales were 1.63 billion yuan, a year - on - year decrease of 46.1%. As of December 19, the total box - office revenue of national movies in the past 7 days was 68,810,800 yuan, a year - on - year increase of 95.4% [28][31]. - **Transportation**: As of December 14, the port container throughput was 6.589 million twenty - foot equivalent units, a year - on - year increase of 7.4%. As of December 19, the average subway passenger volume in first - tier cities in the past 7 days was 3.9086 million person - times, a year - on - year increase of 2.1%. As of December 14, the postal express delivery volume was 4.13 billion pieces, a year - on - year decrease of 0.3%, and the delivery volume was 4.02 billion pieces, a year - on - year decrease of 1.3%. The railway freight volume was 79.935 million tons, a year - on - year decrease of 2.1%, and the highway truck traffic volume was 54.345 million vehicles, a year - on - year decrease of 2.1% [38][41]. - **Industrial Production**: As of December 17, the blast furnace operating rate of major steel enterprises was 76.1%, a year - on - year increase of 0.9 pct. As of December 18, the average operating rate of asphalt was 21.0%, a year - on - year decrease of 1.0 pct. As of December 18, the operating rate of soda ash was 82.9%, a year - on - year increase of 1.0 pct, and the PVC operating rate was 77.3%, a year - on - year decrease of 1.0 pct. As of December 19, the average operating rate of PX was 88.5%, and the average operating rate of PTA was 74.1% [46][50]. - **Real Estate**: As of December 19, the total commercial housing transaction area in 30 large - and medium - sized cities in the past 7 days was 251,400 square meters, a year - on - year decrease of 25.2%. As of December 12, the second - hand housing transaction area in 9 sample cities was 148,500 square meters, a year - on - year decrease of 39.0% [53][58]. - **Prices**: As of December 19, the average wholesale price of pork was 17.5 yuan/kg, a year - on - year decrease of 24.1% and a 2.6% decrease compared to 4 weeks ago. The average wholesale price of vegetables was 5.9 yuan/kg, a year - on - year increase of 17.6% and a 3.9% increase compared to 4 weeks ago. The average wholesale price of 6 key fruits was 7.6 yuan/kg, a year - on - year increase of 6.1% and a 6.6% increase compared to 4 weeks ago. The average price of thermal coal at northern ports was 744 yuan/ton, a year - on - year decrease of 5.1% and a 10.9% decrease compared to 4 weeks ago. The average spot price of WTI crude oil was 56.2 US dollars/barrel, a year - on - year decrease of 19.9% and a 6.0% decrease compared to 4 weeks ago. The average spot price of rebar was 3,208.9 yuan/ton, a year - on - year decrease of 4.3% and a 1.6% increase compared to 4 weeks ago. The average spot price of iron ore was 803.2 yuan/ton, a year - on - year increase of 0.1% and a 0.5% decrease compared to 4 weeks ago. The average spot price of glass was 13.4 yuan/square meter, a year - on - year decrease of 18.0% and a 2.1% decrease compared to 4 weeks ago [61][63]. 3.3 Bond and Foreign Exchange Markets - **Money Market Rates**: On December 19, the overnight Shibor was 1.27%, a decrease of 0.07 BP compared to December 15. R001 was 1.35%, an increase of 0.51 BP compared to December 15; R007 was 1.51%, an increase of 0.25 BP compared to December 15. DR001 was 1.27%, a decrease of 0.34 BP compared to December 15; DR007 was 1.44%, a decrease of 0.27 BP compared to December 15. IBO001 was 1.33%, an increase of 0.41 BP compared to December 15; IBO007 was 1.46%, a decrease of 1.50 BP compared to December 15 [68]. - **Bond Yields**: On December 19, the yields of 1 - year, 5 - year, 10 - year, and 30 - year treasury bonds were 1.36%, 1.60%, 1.83%, and 2.23% respectively, a decrease of 3.1 BP, 2.5 BP, 0.8 BP, and 2.2 BP respectively compared to December 12. The yields of 1 - year, 5 - year, 10 - year, and 30 - year China Development Bank bonds were 1.58%, 1.80%, 1.97%, and 2.40% respectively, a decrease of 3.0 BP, 3.1 BP, 1.8 BP, and 0.4 BP respectively compared to December 12. The yields of 1 - year, 5 - year, and 10 - year local government bonds were 1.54%, 1.78%, and 2.05% respectively, a decrease of 0.4 BP, an increase of 0.1 BP, and a decrease of 0.5 BP respectively compared to December 12. The yields of 1 - month and 1 - year AAA and AA + inter - bank certificates of deposit were 1.62%, 1.64%, 1.64%, and 1.67% respectively, a decrease of 0.2 BP, 2.6 BP, 0.2 BP, and 2.6 BP respectively compared to December 12 [72][73]. - **International Bond Yields**: As of December 19, 2025, the yields of 10 - year treasury bonds in the US, Japan, the UK, and Germany were 4.16%, 2.02%, 4.53%, and 2.98% respectively, a decrease of 3 BP, an increase of 7 BP, an increase of 3 BP, and an increase of 4 BP respectively compared to December 12 [80]. - **Exchange Rate**: On December 19, the central parity rate and spot exchange rate of the US dollar against the Chinese yuan were 7.06 and 7.04 respectively, a decrease of 88 and 144 pips respectively compared to December 12 [82]. 3.4 Investment Suggestions The bond market in 2026 may perform better than expected. Since the second half of the year, the bond market has often deviated from the fundamentals and is dominated by institutional behavior. It is expected that the policy interest rate will be cut by about 20 BP in 2026, with a 10 - BP cut likely in Q1. In the long - term, the yield of 30 - year treasury bonds is closely related to the population structure, and it is predicted that the yield of 30 - year treasury bonds will fall below 2% in 2026. Different from the unanimous bullish sentiment of institutions a year ago, many non - bank institutions are currently bearish on the bond market, so the bond market in 2026 may perform better than expected. Currently, it is recommended to focus on the allocation value of 5 - year bank capital bonds and ultra - long - term interest - rate bonds [4][86].

Group 1 - The report highlights significant fluctuations in the bond market following two important meetings, with the 30-year government bond yield experiencing a range between 2.23% and 2.28% [1][23] - The first main line of analysis focuses on the supply and demand issues for government bonds in 2026, with expectations of a net supply increase from 6.4 trillion yuan in 2025 to a range of 6.5 to 7.2 trillion yuan [2][25] - The second main line discusses speculation around structural interest rate cuts, particularly the LPR, due to weak demand and real estate data, with a notable decline in residential short-term loans [3][26] Group 2 - The report suggests that if the LPR structural interest rate cut is implemented, the bond market may experience a positive reaction, with potential rapid growth in demand towards the year-end [4][33] - The analysis indicates that the long-end interest rate's upward boundary is becoming clearer, with the 10-year government bond yield expected to stabilize around 1.85% [5][36] - The report emphasizes that the current bond market may be entering a turning point, with bullish forces beginning to emerge, suggesting a more optimistic strategy compared to early December [7][39] Group 3 - The report notes a slight decrease in the scale of wealth management products as the year-end approaches, with a weekly decline of over 1,000 billion yuan [40] - It highlights that the net value drawdown of pure bond products has continued to narrow, with the proportion of negative yields decreasing [47][56] - The report indicates that the overall performance of wealth management products is improving, with the proportion of products not meeting performance standards declining to 26.4% [56][61]

Supply and Demand Dynamics - The total supply of long-term government bonds in 2026 is projected to be between 6.5 trillion and 7.2 trillion yuan, slightly higher than the 6.4 trillion yuan in 2025[2][4]. - The issuance of long-term government bonds has increased significantly since 2019, with the proportion of bonds with a maturity of over 10 years rising from less than 5% before 2019 to around 25% in recent years[2]. Market Behavior and Trends - From November 20 to December 15, 2025, net sales of bonds with maturities over 10 years totaled 659 billion yuan by brokerages, with funds also selling 458 billion yuan during the same period due to relative ranking pressures[1]. - The yield on 10-year government bonds rose from 1.81% to 1.87%, while the yield on 30-year bonds increased from 2.14% to 2.28%, leading to a widening yield spread of 43 basis points[1]. Issuance Patterns - In 2025, the issuance of special government bonds accounted for 1.3 trillion yuan, while ordinary long-term bonds totaled 211 billion yuan, indicating a shift towards longer maturities[3]. - The issuance of long-term local government bonds peaked in the first quarter of 2025, with significant amounts issued in subsequent months, reflecting a balanced issuance rhythm throughout the year[5][6]. Institutional Demand and Capacity - Major banks have been net sellers of long-term government bonds, with cumulative net sales of 3.58 trillion yuan for large banks and 2.79 trillion yuan for joint-stock banks in 2025[8]. - Insurance companies have emerged as significant buyers of long-term bonds, with net purchases of 2.36 trillion yuan in long-term government bonds and 1.88 trillion yuan in local bonds in 2025[9]. Future Outlook - The demand for long-term government bonds in 2026 may be constrained by potential declines in insurance premium growth and regulatory pressures on asset management products, which could limit their capacity to absorb new issuances[10][11]. - The market's ability to improve the supply-demand structure will be crucial for the performance of long-term bonds, with potential adjustments in bank capacity and central bank interventions being key factors to watch[12].

1. Report Industry Investment Rating - No industry investment rating is provided in the report. 2. Core Viewpoints - Credit demand remains weak, with new loans in November significantly lower than the same period last year, and future new loans may continue to be lower year - on - year, with loan growth rates continuing to decline [2] - M1 growth continues to decline, and it may further drop in the future. M2 growth decreased slightly month - on - month in November [2] - Social financing growth may continue to decline in the next few months, with an expected year - end social financing growth rate of around 8.2% [2] - The bond market in 2026 may perform better than expected, with a recommended focus on the allocation value of 5Y bank capital bonds and ultra - long - term interest - rate bonds [2] 3. Summary by Related Content 3.1 November Financial Data - On the evening of December 12, the central bank disclosed November financial data: new loans were 39 billion yuan, and social financing increased by 2.49 trillion yuan. At the end of November, M2 reached 337 trillion yuan, a year - on - year increase of 8.0%; M1 increased by 4.9% year - on - year; and the social financing growth rate was 8.5% [1] 3.2 Credit Situation - Due to weak credit demand, new loans in the first month of a quarter are usually low, while banks prefer to boost credit scales at the end of a quarter. In November, new loans were only 39 billion yuan, significantly lower than the same period last year. Personal loans were - 20.63 billion yuan, corporate loans were + 61 billion yuan, and non - bank inter - bank loans were - 1.47 billion yuan [2] - In November, short - term personal loans were - 21.58 billion yuan, and long - term personal loans were + 1 billion yuan, both significantly lower than the same period last year, indicating that residents are actively de - leveraging, and consumption and mortgage credit demands are weak. Corporate short - term loans were + 10 billion yuan, corporate long - term loans were + 17 billion yuan, and bill financing was + 33.42 billion yuan, showing weak corporate credit demand [2] 3.3 M1 and M2 Situation - Since January 2025, the central bank has used a new M1 caliber, which further includes personal current deposits and non - bank payment institution customer reserves. The new M1 growth rate is more stable. In November, the new M1 growth rate was 4.9%, 1.3 percentage points lower than the end of last month, and has been declining since the end of September. The M2 growth rate was 8.0% at the end of November, a slight month - on - month decrease [2] 3.4 Social Financing Situation - In November, the social financing increment was 2.49 trillion yuan (2.33 trillion yuan in November 2024), a slight year - on - year increase, mainly from off - balance - sheet financing and net corporate bond financing. The increment of RMB loans to the real economy in November was 40.53 billion yuan, 11.63 billion yuan less than the same period last year [2] - Entrusted loans were - 1.88 billion yuan, trust loans were + 8.44 billion yuan, undiscounted bank acceptance bills were + 14.9 billion yuan; corporate bond net financing was 41.69 billion yuan, 17.88 billion yuan more than the same period last year; government bond net financing was 1.2 trillion yuan. Due to the slight year - on - year increase in social financing, the social financing growth rate remained flat at 8.5% at the end of November [2] - It is expected that the new loans (social financing caliber) for the whole year will be lower year - on - year, government bond net financing will expand significantly year - on - year, social financing will increase year - on - year, the social financing growth rate may first rise and then fall, and the year - end social financing growth rate will be around 8.2%. Due to the misaligned issuance rhythm of government bonds, the social financing growth rate peaked in July, and it may continue to decline significantly in the next few months [2] 3.5 Bond Market Outlook - Since the second half of the year, the bond market has often deviated from the fundamentals and is dominated by institutional behavior. Currently, the long - term bond yield has reached a new high this year, and with the increasing economic downward pressure, the probability of a successful long - position is high. It is expected that the policy interest rate will be lowered by about 20BP in 2026, with a possible 10BP cut in the first quarter [2] - Currently, many non - bank institutions are bearish on the bond market, but the bond market in 2026 may perform better than expected. The rapid decline in bank liability costs, the high allocation value of government bonds, and weak credit demand are expected to support banks to significantly increase bond investments. In addition, the rapid growth of wealth management scale and the low proportion of bond holdings in wealth management are expected to support credit bonds within 3 years. It is recommended to focus on the allocation value of 5Y bank capital bonds and ultra - long - term interest - rate bonds [2]

Core Viewpoint - The bond market is expected to continue a weak oscillating pattern in 2026, influenced by concerns over rising inflation and ongoing strict regulations, which aligns with current market expectations [1] Group 1: Economic Policy Outlook - A potential shift from expansive fiscal policy to stable fiscal policy may occur if economic growth targets are lowered, which could reduce the fiscal deficit ratio and alleviate supply pressure on government bonds [1] - The transition from stable monetary policy to expansive monetary policy could enhance bond market performance beyond expectations, but this may require the emergence of bottom-up risk events [1] Group 2: Market Dynamics - The key to the bond market's performance in 2026 will be the anticipation of substantial changes in monetary policy, with a possible pattern of "slow at first, fast later," where the first quarter may remain subdued while waiting for policy changes and addressing inflation concerns [1] - The second and third quarters may present opportunities for market engagement, potentially leading to the formation of an annual low point [1]