Market Performance - The majority of government bond futures closed lower, with the 30-year main contract down by 0.22%, the 10-year main contract down by 0.02%, the 5-year main contract down by 0.02%, and the 2-year main contract unchanged [1] - The yields on major interbank bonds mostly rose, with the 10-year China Development Bank bond yield increasing by 0.35 basis points to 1.9675%, while the 10-year government bond yield decreased by 0.1 basis points to 1.8420%, and the 30-year government bond yield rose by 0.3 basis points to 2.3040% [1] Funding Conditions - The central bank announced a 7-day reverse repurchase operation of 158.3 billion yuan at a fixed rate of 1.40%, with the same amount being the bid and awarded [2] - On that day, 86.1 billion yuan of reverse repos matured, resulting in a net injection of 72.2 billion yuan [2] - The interbank market showed stable funding supply and prices, with the overnight repo weighted average rate (DR001) fluctuating slightly above 1.3% [2] Economic Fundamentals - The National Bureau of Statistics reported that China's GDP for 2025 is projected to be 14,018.79 billion yuan, with a year-on-year growth of 5% [3] - In Q4 2025, GDP is expected to grow by 4.5%, matching the forecast, while Q3 growth was 4.8% [3] - Retail sales in December 2025 increased by 0.9% year-on-year, below the expected 1.5% [3] - Fixed asset investment decreased by 3.8% year-on-year, worse than the expected decline of 2.4% [3] - Real estate development investment in 2025 was 82,788 million yuan, down 17.2% from the previous year, with new housing sales area and sales value declining by 8.7% and 12.6%, respectively [3] Operational Recommendations - The funding conditions have marginally eased, but a contraction is expected due to the tax period [4] - The recently released December economic data indicates a divergence between strong production and weak demand [4] - The 10-year government bond yield is currently around 1.85%, which is considered a reasonable pricing [4] - Future bond market trends will likely depend on policy strength and supply-demand conditions in Q1, with the 10-year bond yield expected to fluctuate between 1.83% and 1.88% [4]

Core Viewpoint - The trend of small banks purchasing bonds is expected to continue, but the underlying logic is changing due to a weakening of their liability advantages and a decrease in deposit attraction, which constrains their demand for bond allocation [1][5][9]. Group 1: Small Banks' Bond Purchasing Trends - Small banks have shown a consistent increase in bond investment, with their bond investment balance reaching 46.41 trillion yuan by the end of May 2025, marking an 11-month continuous rise [2]. - Despite the current volatility in the bond market, many institutions believe that the trend of small banks purchasing bonds will persist during the "opening red" period [3]. - The first quarter has historically seen small banks, particularly rural commercial banks, maintain a high loan-to-deposit spread, leading them to invest heavily in bonds to enhance performance [3][4]. Group 2: Changes in Deposit Attraction - The attractiveness of deposits from small banks has diminished, leading to a reduction in their ability to attract deposits through high-interest rates [5]. - Recent observations indicate that the interest rate gap between small banks and large banks is narrowing, with some small banks resorting to non-price methods such as physical rewards to attract deposits [5]. - The decline in deposit rates for small banks is expected to weaken the deposit diversion effect from large banks, impacting their overall deposit absorption capabilities [5][6]. Group 3: Market Environment and Investment Strategies - The bond market has entered a phase of volatility after two years of a bull market, with the yield on 10-year government bonds rising approximately 25 basis points to 1.852% by the end of 2025 [7]. - Many banks have reported unrealized losses on bond assets due to rising interest rates, affecting their non-interest income [7]. - In response to the changing market conditions, small banks are likely to adopt a more conservative investment strategy focused on holding bonds to maturity for interest income rather than speculative trading [8][9]. Group 4: Future Expectations - The first quarter of 2026 is anticipated to see a concentration of bond purchases by rural commercial banks, driven by seasonal deposit inflows and the need to secure interest income early [8]. - Analysts suggest that the configuration process for bond investments has already begun, supported by favorable conditions such as increased deposit growth and regulatory adjustments [9].

Report Industry Investment Rating - Not mentioned in the provided content Core Viewpoints - The bond market rebounded slightly last week due to the central bank's 900 billion yuan 6 - month repurchase operation, a 25BP reduction in the structural monetary policy tool rate, good December import - export growth, weak December financial data, consecutive negative growth in household loans for three months, and the A - share market correction [1][4][11][39] - The current bond market is more likely to fluctuate. The economic stabilization since Q4 2024 was mainly due to central government leverage. With no additional treasury bond issuance in Q4 2025 and the decline in government bond financing growth, the domestic economy in Q4 remains under pressure. Also, in 2026, the Party Central Committee emphasizes high - quality development more, and the importance of "seeking progress while maintaining stability" in economic aggregates has decreased. Additionally, the absolute interest rate level is low, there is heavy selling pressure in treasury bond futures, and investor sentiment is generally weak [2][3][12][13] - The 30 - 10 spread of treasury bonds reached a new high this week and is expected to fluctuate at a high level in the near term. The spread of 20 - year CDB bonds is expected to fluctuate narrowly [2][3][12][13] Summary by Directory Weekly Review Long - term Bond Review - The central bank conducted a 900 billion yuan 6 - month repurchase operation and reduced the structural monetary policy tool rate by 25BP. December import - export growth was good, but December financial data was weak, with household loans in negative growth for the third consecutive month. Along with the A - share correction, the bond market rebounded slightly. The trading activity of long - term bonds decreased slightly last week but was still very active. The term spread and variety spread of long - term bonds widened [1][4][11] Long - term Bond Investment Outlook - **30 - year Treasury Bonds**: As of January 16, the spread between 30 - year and 10 - year treasury bonds was 46BP, at a historically low level. Considering economic and policy factors, the bond market is likely to fluctuate, and the 30 - 10 spread is expected to fluctuate at a high level [2][12] - **20 - year CDB Bonds**: As of January 16, the spread between 20 - year CDB bonds and 20 - year treasury bonds was 15BP, at a historically extremely low level. Given the economic situation, the bond market is likely to fluctuate, and the variety spread of 20 - year CDB bonds is expected to fluctuate narrowly [3][13] Long - term Bond Basic Overview - The balance of outstanding long - term bonds is 24.3 trillion yuan. As of December 31, the total amount of long - term bonds with a remaining maturity of over 14 years was 24.4329 trillion yuan, accounting for 15.1% of the total bond balance. Local government bonds and treasury bonds are the main varieties. In terms of remaining maturity, the 30 - year variety has the highest proportion [14] Primary Market Weekly Issuance - Last week (January 12 - 16, 2026), the issuance of long - term bonds dropped sharply to 83.7 billion yuan. By variety, treasury bonds were 32 billion yuan, local government bonds were 51.7 billion yuan, and other varieties had zero issuance. By term, the 30 - year variety had the largest issuance [19] This Week's Planned Issuance - The announced long - term bond issuance plan for this week is 102.2 billion yuan, including 10.12 billion yuan of long - term local government bonds and 1 billion yuan of long - term medium - term notes [25] Secondary Market Trading Volume - Last week, long - term bonds were very actively traded, with a turnover of 879.5 billion yuan, accounting for 9.7% of the total bond turnover. The trading activity decreased slightly compared to the previous week, with a decrease in turnover and proportion in most varieties, except for an increase in long - term local government bonds and long - term government agency bonds [27][28] Yield - Due to various factors, the bond market rebounded slightly. The yields of 15 - year, 20 - year, 30 - year, and 50 - year treasury bonds, CDB bonds, local bonds, and railway bonds changed to different extents. Representative individual bonds also had corresponding yield changes [39][40] Spread Analysis - **Term Spread**: The term spread of long - term bonds widened last week, with an absolute low level. The 30 - 10 spread of benchmark treasury bonds was 46BP, a 4BP change from the previous week, at the 35th percentile since 2010 [46] - **Variety Spread**: The variety spread of long - term bonds widened last week, with an absolute low level. The spreads between 20 - year CDB bonds and treasury bonds, and 20 - year railway bonds and treasury bonds were 15BP and 20BP respectively, with changes of 1BP and 2BP from the previous week, at the 14th and 20th percentiles since 2010 [47] 30 - year Treasury Bond Futures - Last week, the main contract of 30 - year treasury bond futures, TL2603, closed at 111.16 yuan, an increase of 0.26%. The total trading volume was 542,700 lots (- 18,010 lots), and the open interest was 140,000 lots (- 8,274 lots). Both trading volume and open interest decreased slightly compared to the previous week [52]

1. Report Industry Investment Rating - The rating for treasury bonds is "Oscillation" [5] 2. Core Viewpoints of the Report - The sustainability and extent of the bond market recovery should not be overestimated. The bond market's rebound momentum will weaken next week, and it will likely show a sideways trend due to cooling stock markets [2][12][14] - The monetary policy environment is not favorable for the bond market. The central bank prefers structural policies, and the probability of short - term reserve requirement ratio cuts or interest rate cuts is low [12][13] - Economic fundamentals at the beginning of the year may be stronger than market expectations. Policies in multiple areas such as currency and real estate are actively driving, and economic data may exceed expectations [13] - There are marginal negatives in terms of funds and supply. Next week, government bond supply will increase, reverse repurchase maturities are large, and January is a big month for tax payments, leading to tightened liquidity [13][14] - Investment strategies include a one - sided strategy of short - term oscillation and long - term bearishness, suggesting short - selling on rallies; a short - hedging strategy, maintaining a certain short - hedging position; and a curve strategy of moderately focusing on steepening the curve, such as going long 3T and short TL [2][15][16][17] 3. Summary by Relevant Catalogs 3.1 One - Week Review and Outlook 3.1.1 This Week's Trend Review - From January 12th to 18th, treasury bond futures had a weak rebound. Their performance was affected by stock market trends, regulatory actions, and central bank policies. As of January 16th, the settlement prices of the two - year, five - year, ten - year, and thirty - year treasury bond futures main contracts were 102.400, 105.805, 108.065, and 111.170 yuan respectively, up 0.062, 0.235, 0.290, and 0.300 yuan from last weekend [1][10] 3.1.2 Next Week's Outlook - The bond market's rebound momentum will weaken, showing a sideways trend. The reasons include the unfavorable monetary policy environment, the possibility of economic data exceeding expectations, and tightened liquidity [12][13][14] 3.2 Weekly Observation of Interest - Rate Bonds 3.2.1 Primary Market - This week, 44 interest - rate bonds were issued, with a total issuance volume of 451.591 billion yuan and a net financing of - 192.540 billion yuan, down 311.643 billion and 541.724 billion yuan from last week respectively. 15 local government bonds were issued, with a total issuance volume of 74.841 billion yuan and a net financing of 65.570 billion yuan, down 42.823 billion and 52.094 billion yuan from last week respectively. 508 inter - bank certificates of deposit were issued, with a total issuance volume of 553.580 billion yuan and a net financing of - 254.880 billion yuan, up 378.520 billion yuan in issuance volume and down 101.580 billion yuan in net financing from last week [18] 3.2.2 Secondary Market - Treasury bond yields declined. As of January 16th, the yields of the two - year, five - year, ten - year, and thirty - year treasury bonds were 1.40%, 1.61%, 1.84%, and 2.30% respectively, down 3.32, 4.81, 3.62, and 0.70 basis points from last weekend. The 10Y - 1Y, 10Y - 5Y, and 30Y - 10Y spreads widened, and the yields of the one - year, five - year, and ten - year policy financial bonds also declined [28][29] 3.3 Treasury Bond Futures 3.3.1 Price, Trading Volume, and Open Interest - Treasury bond futures had a weak rebound. As of January 16th, the settlement prices of the two - year, five - year, ten - year, and thirty - year treasury bond futures main contracts were 102.400, 105.805, 108.065, and 111.170 yuan respectively, up from last weekend. The trading volumes of the two - year, five - year, ten - year, and thirty - year treasury bond futures this week were 36,416, 64,921, 75,626, and 121,759 lots respectively, down from last week. The open interests were 78,854, 161,793, 253,607, and 177,194 lots respectively, with changes compared to last week [36][38] 3.3.2 Basis and IRR - The current positive arbitrage strategy opportunities are not obvious. Recommended strategies include a negative duration strategy if expecting a large bond market correction and a long - old bond and short - futures, duration - neutral arbitrage strategy in the short - term [44] 3.3.3 Inter - delivery and Inter - variety Spreads - As of January 16th, the inter - delivery spreads of the 2603 - 2606 contracts of the two - year, five - year, ten - year, and thirty - year treasury bond futures were - 0.032, - 0.020, + 0.060, and - 0.100 yuan respectively, with changes compared to last weekend [50] 3.4 Weekly Observation of the Fundamentals - This week, the central bank conducted 951.5 billion yuan in reverse repurchase operations, with 138.7 billion yuan in reverse repurchase maturities, achieving a net injection of 812.8 billion yuan. There were 600 billion yuan in term reverse repurchase maturities, and the central bank conducted 900 billion yuan in term reverse repurchase operations. As of January 16th, R007, DR007, SHIBOR overnight, and SHIBOR 1 - week rates changed compared to last weekend. The average daily trading volume of the inter - bank pledged repurchase increased compared to last week [52][53][57] 3.5 Weekly Overseas Observation - The US dollar index strengthened slightly, and the 10Y US Treasury yield rose slightly. As of January 16th, the US dollar index rose 0.23% from last weekend to 99.3691, the 10Y US Treasury yield rose 6 basis points to 4.24%, and the 10Y China - US Treasury yield spread was inverted by 239.5 basis points [59][60] 3.6 Weekly Observation of High - Frequency Inflation Data - This week, industrial product prices showed mixed trends, while agricultural product prices all rose. As of January 16th, the Nanhua Industrial Product Index, Metal Index, and Energy and Chemicals Index changed compared to last weekend, and the prices of pork, 28 key vegetables, and 7 key fruits also increased [63] 3.7 Investment Recommendations - The market is expected to be sideways in the short - term and bearish in the long - term. It is recommended to focus on short - selling on rallies [64]

Market Overview - The bond market showed weakness in early trading on January 14, with a net injection of 212.2 billion yuan in the open market, while funding rates generally increased [1][5] - The market is characterized by mixed factors, making it difficult to establish a clear trend, with expectations of continued volatility [1] Bond Futures - Most government bond futures closed higher, with the 30-year main contract down 0.04% at 111.27, while the 10-year main contract rose 0.08% to 107.93 [2] - The 10-year government bond yield decreased by 0.5 basis points to 1.855%, while the 30-year yield increased by 0.35 basis points to 2.2975% [2] International Bond Market - In North America, U.S. Treasury yields were mixed, with the 2-year yield down 0.19 basis points at 3.530% and the 30-year yield up 0.82 basis points at 4.837% [3] - In the Eurozone, yields on 10-year bonds increased, with French bonds up 1.6 basis points to 3.520% and German bonds up 0.7 basis points to 2.845% [3] Primary Market - The Ministry of Finance reported weighted average yields for 91-day, 1-year, and 30-year government bonds at 1.1726%, 1.22%, and 2.38%, respectively, with bid-to-cover ratios of 3.13, 2.29, and 5.17 [4] - Agricultural Development Bank's financial bonds had yields of 1.5063%, 1.6530%, and 1.9961% for 1.0356-year, 3-year, and 10-year bonds, with bid-to-cover ratios of 3.03, 3.9, and 5.22 [4] Funding Conditions - The central bank conducted a 240.8 billion yuan reverse repurchase operation at a rate of 1.40%, resulting in a net injection of 212.2 billion yuan for the day [5] - Short-term Shibor rates mostly increased, with the overnight rate down 0.1 basis points to 1.39% and the 7-day rate up 2.7 basis points to 1.55% [5] Institutional Insights - CITIC Securities noted that local government financing platforms are accelerating the separation of their financing functions, with stronger regions managing to adapt better to market conditions [6] - China International Capital Corporation highlighted that inflationary pressures in the U.S. are primarily from the service sector, suggesting that the Federal Reserve may maintain its current stance on interest rates for the time being [7]

1. Report Industry Investment Rating No information provided. 2. Core View of the Report - Last week, the central bank announced buying bonds worth 50 billion yuan in November, with the purchase scale the same as in October. The open - market had a large - scale net withdrawal, inflation continued to recover in December, and the A - share market had a strong start with both volume and price rising. The bond market first declined and then rose, and the yield of ultra - long bonds reached a new high during the week. The trading activity of ultra - long bonds increased slightly, and both the term spread and the variety spread widened [1][4][11]. - The current bond market is more likely to fluctuate. For the 30 - year treasury bond, as of January 9, the spread between the 30 - year and 10 - year treasury bonds was 42BP, at a relatively low historical level. For the 20 - year CDB bond, the spread between the 20 - year CDB bond and the 20 - year treasury bond was 14BP, at an extremely low historical position. The economic downward pressure increased in November, and the deflation risk continued to ease in December. The economic stabilization since Q4 2024 was mainly due to the central government's leverage - increasing support. Considering no additional treasury bond issuance in Q4 2025 and the decline in the financing growth rate of government bonds in Q4, the domestic economy in Q4 was still under pressure. Also, the Party Central Committee attaches more importance to high - quality development in 2026. With the low absolute level of interest rates, the sharp rise of the A - share market at the beginning of the year, and the large selling pressure of treasury bond futures, investors' sentiment was generally weak. It is expected that the 30 - 10 spread will fluctuate at a high level, and the variety spread of the 20 - year CDB bond will fluctuate in a narrow range [2][3][12][13]. 3. Summary According to the Directory Weekly Review Ultra - long Bond Review - The central bank bought 50 billion yuan of bonds in November, with the scale the same as in October. The open - market had a large - scale net withdrawal, inflation continued to warm up in December, the A - share market had a strong start, the bond market first declined and then rose, and the yield of ultra - long bonds reached a new high during the week. The trading activity of ultra - long bonds increased slightly and was very active. The term spread and variety spread of ultra - long bonds widened [1][11]. Ultra - long Bond Investment Outlook - **30 - year Treasury Bond**: As of January 9, the 30 - 10 spread was 42BP, at a relatively low historical level. The economic downward pressure increased in November (GDP growth rate was about 4.1% year - on - year, down 0.1% from October). In December, CPI was 0.8% and PPI was - 1.9%, and the deflation risk continued to ease. The bond market is likely to fluctuate. The 30 - 10 spread is expected to fluctuate at a high level [2][12]. - **20 - year CDB Bond**: As of January 9, the spread between the 20 - year CDB bond and the 20 - year treasury bond was 14BP, at an extremely low historical position. Similar to the 30 - year treasury bond, considering economic and market factors, the bond market is likely to fluctuate, and the variety spread of the 20 - year CDB bond is expected to fluctuate in a narrow range [3][13]. Ultra - long Bond Basic Overview - The balance of outstanding ultra - long bonds was 24.3 trillion yuan. As of December 31, the total amount of ultra - long bonds with a remaining term of more than 14 years was 24,432.9 billion yuan (excluding asset - backed securities and project revenue notes), accounting for 15.1% of the total bond balance. Local government bonds and treasury bonds were the main varieties. By remaining term, the 30 - year variety had the highest proportion [14]. Primary Market Weekly Issuance - Last week (January 4 - 9, 2026), the issuance volume of ultra - long bonds increased sharply, reaching 191.6 billion yuan. By variety, local government bonds accounted for the largest share. By term, the 30 - year bonds had the largest issuance volume [20]. This Week's Scheduled Issuance - The announced issuance plan for ultra - long bonds this week is 84.2 billion yuan, including 32 billion yuan of ultra - long treasury bonds, 51.7 billion yuan of ultra - long local government bonds, and 0.5 billion yuan of ultra - long medium - term notes [24]. Secondary Market Trading Volume - Last week, the trading of ultra - long bonds was very active, with a trading volume of 984.1 billion yuan, accounting for 11.3% of the total bond trading volume. The trading activity increased slightly compared with the previous week [28]. Yield - The yield of ultra - long bonds reached a new high during the week. The yields of 15 - year, 20 - year, 30 - year, and 50 - year treasury bonds, CDB bonds, local bonds, and railway bonds all changed to different extents [38]. Spread Analysis - **Term Spread**: The term spread of ultra - long bonds widened last week, and the absolute level was low. The 30 - 10 spread of benchmark treasury bonds was 42BP, up 1BP from the previous week, at the 27% quantile since 2010 [50]. - **Variety Spread**: The variety spread of ultra - long bonds widened last week, and the absolute level was low. The spreads between the 20 - year CDB bond and treasury bond, and between the 20 - year railway bond and treasury bond were 14BP and 18BP respectively, up 0BP and 1BP from the previous week, at the 12% and 13% quantiles since 2010 [51]. 30 - year Treasury Bond Futures - Last week, the main contract of the 30 - year treasury bond futures, TL2603, closed at 110.87 yuan, a decline of - 0.48%. The total trading volume was 560,700 lots, and the open interest was 148,200 lots. The trading volume increased significantly, and the open interest increased slightly compared with the previous week [54].

Core Viewpoint - The bond fund market in 2026 has started off poorly, with over 40% of pure bond funds failing to achieve positive returns due to rising long-term interest rates, particularly affecting medium to long-term products [3][5][12]. Group 1: Market Performance - Approximately 1,600 medium to long-term pure bond funds have not achieved positive returns, accounting for nearly 50% of all such funds [5][9]. - The average return of bond funds over the past year is only 1.83%, a significant drop from 3.60% in the previous year, indicating a near halving of returns [8][10]. - In 2025, the average return of medium to long-term pure bond funds was just 0.78%, down nearly 80% from 3.44% in 2024, even falling below the average return of money market funds at 1.12% [10][11]. Group 2: Fund Performance and Flows - The bond market's weak performance has led to significant capital outflows, with over 50 billion yuan withdrawn from bond ETFs and large redemptions from several off-market bond funds [6][8]. - Notable underperformers include funds like Jinyuan Shun'an Hongze and Huatai Baoxing Zunyi Rate Bond, with declines exceeding 0.7% [6][7]. Group 3: Factors Influencing Returns - The primary reason for the decline in returns is the upward pressure on long-term bond yields, with the 10-year government bond yield rising about 5 basis points to 1.89% and the 30-year yield increasing about 8 basis points to 2.33% since the beginning of the year [12][14]. - Many underperforming funds had high exposure to long-term government bonds, which has contributed to their poor performance amid rising interest rates [13][14]. Group 4: Future Outlook - The bond market is expected to enter a phase of wide fluctuations, with limited downward space for yields but manageable risks for significant upward movements [3][19]. - Analysts suggest that a conservative coupon strategy may offer better value in the current market environment compared to trading strategies [18][19]. - The overall sentiment among institutions regarding the bond market in 2026 is cautious, contrasting with the bullish environment of 2023-2024 [18][19].

1. Report Industry Investment Rating - No industry investment rating information is provided in the report. 2. Core Viewpoints of the Report - The long - term bond market is more likely to fluctuate. For 30 - year treasury bonds and 20 - year CDB bonds, considering factors such as economic pressure in Q4 2026, the central government's emphasis on high - quality development, low interest rates, market desensitization to positive factors, and large selling pressure in treasury bond futures, the bond market is expected to fluctuate. The 30 - 10 spread of 30 - year treasury bonds is expected to fluctuate at a high level, and the spread of 20 - year CDB bonds is expected to fluctuate narrowly [2][3]. - Last week, long - term bonds tumbled again. The yield of long - term varieties increased due to the mention of expanding fiscal expenditure at the fiscal work conference and the rebound of the manufacturing PMI in December. The trading activity of long - term bonds changed little but was very active. The term spread widened, and the variety spread narrowed [1][4]. 3. Summary by Relevant Catalogs Weekly Review Long - term Bond Review - Last week, long - term bonds tumbled again. The yield of long - term varieties increased as the fiscal work conference mentioned expanding fiscal expenditure and the manufacturing PMI in December rebounded 0.9 to 50.1, returning to the boom - bust line for the first time since April. In terms of trading, the trading activity of long - term bonds changed little but was very active. The term spread widened, and the variety spread narrowed [1][4]. Long - term Bond Investment Outlook - **30 - year Treasury Bonds**: As of December 31, the spread between 30 - year and 10 - year treasury bonds was 40BP, at a historically low level. In November, the economic downward pressure continued to increase, with the estimated GDP growth rate of about 4.1%, a 0.1% decline from October. The deflation risk eased with CPI at 0.7% and PPI at - 2.2%. The bond market is more likely to fluctuate. The economic stabilization since Q4 last year was mainly due to central government leverage. Without additional treasury bond issuance in Q4 2026, the government bond financing growth rate is expected to decline rapidly, and the economy will still face pressure. The central government attaches more importance to high - quality development in 2026. Also, the absolute level of interest rates is low, the market is desensitized to positive factors, and the selling pressure of treasury bond futures is large. The 30 - 10 spread is expected to fluctuate at a high level [2]. - **20 - year CDB Bonds**: As of December 31, the spread between 20 - year CDB bonds and 20 - year treasury bonds was 16BP, at a historically extremely low level. The economic situation in November was similar to that of 30 - year treasury bonds. The bond market is more likely to fluctuate. Considering the short - term bond market fluctuation, the variety spread of 20 - year CDB bonds is expected to fluctuate narrowly [3]. Long - term Bond Basic Overview - The balance of long - term bonds is 24.4 trillion. As of December 31, long - term bonds with a remaining term of over 14 years totaled 244,329 billion, accounting for 15.1% of all bonds. Local government bonds and treasury bonds are the main varieties. By variety, treasury bonds accounted for 28.2%, local government bonds 66.4%, etc. By remaining term, the 25 - 35 - year variety accounted for the highest proportion at 40.2% [13]. Primary Market Weekly Issuance - Last week, there was no issuance of long - term bonds. Compared with the week before last, the total issuance volume decreased significantly. By variety and term, the issuance volume was all 0 [18]. This Week's Pending Issuance - The announced long - term bond issuance plan this week totals 929 billion, all of which are long - term local government bonds [20]. Secondary Market Trading Volume - Last week, the trading of long - term bonds was very active, with a turnover of 4,075 billion, accounting for 11.1% of all bonds. By variety, the turnover and proportion of different types of long - term bonds are as follows: long - term treasury bonds accounted for 35.1% of all treasury bonds, long - term local bonds 50.1% of all local bonds, etc. The trading activity decreased. Compared with the week before last, the turnover and proportion of long - term bonds changed: the turnover decreased by 1,607 billion, and the proportion decreased by 1.0%. The turnover and proportion of different types of long - term bonds also changed accordingly [23]. Yield - Last week, long - term bonds tumbled again. The yield of long - term varieties increased. For treasury bonds, the yields of 15 - year, 20 - year, 30 - year, and 50 - year bonds changed by 2BP, 4BP, 4BP, and 4BP to 2.14%, 2.25%, 2.27%, and 2.48% respectively. Similar changes occurred in CDB bonds, local bonds, and railway bonds. For representative individual bonds, the yield of the 30 - year treasury bond active bond 25 extra - long special treasury bond 02 changed by 4.35BP to 2.26%, and the yield of the 20 - year CDB bond active bond 21 CDB 20 changed by 5BP to 2.32% [32][37]. Spread Analysis - **Term Spread**: Last week, the term spread of long - term bonds widened, and the absolute level was low. The 30 - 10 spread of benchmark treasury bonds was 40BP, a 2BP change from the week before last, at the 27% quantile since 2010 [43]. - **Variety Spread**: Last week, the variety spread of long - term bonds narrowed, and the absolute level was low. The spreads between the benchmark 20 - year CDB bonds and treasury bonds, and 20 - year railway bonds and treasury bonds were 16BP and 16BP respectively, with changes of 0BP and - 4BP from the week before last, at the 13% and 11% quantiles since 2010 [44]. 30 - year Treasury Bond Futures - Last week, the main variety of 30 - year treasury bond futures, TL2603, closed at 111.41 yuan, a decrease of 1.37%. The total trading volume was 343,900 lots (- 216,035 lots), and the open interest was 142,100 lots (- 2,500 lots). The trading volume decreased significantly, and the open interest decreased slightly [48].

Group 1: Core Viewpoints - The bond market continued to fluctuate last week, with the yield curve flattening and rising. Affected by multiple factors such as the long - term local bond issuance plan in Shandong, the increase in cross - year funding costs, and better - than - expected official PMI data in December, the market sentiment weakened at the end of the year, and the bond market continued to operate weakly. After the New Year's Day holiday, the new regulations on public fund fees were officially implemented and were more lenient than expected, and the funding pressure eased after the New Year, so the bond market recovered somewhat. Overall, the bond market fluctuated weakly last week, and long - term bond yields rose slightly. For short - term bonds, although the central bank made continuous net injections before the holiday, affected by the cross - New Year's Day holiday, the increase in funding costs led to a significant rise in short - end yields, and the yield curve showed a flat upward trend. [3] - This week (the week of January 5), the bond market is expected to maintain a weakly fluctuating pattern. Although the implementation of the new regulations on public fund fees and the loose funding at the beginning of the year will support the bond market to some extent, due to the high supply of local bonds with a high proportion of long - term bonds under the front - loaded fiscal efforts, the expected warming of the A - share spring market may cause capital diversion, and the "good start" of credit, the bond market will continue to fluctuate weakly in the short term. [3] Group 2: Last Week's Bond Market Review Secondary Market - The bond market fluctuated weakly last week. Long - term bond yields first rose and then fell, with an overall slight increase. The 10 - year Treasury bond futures main contract fell 0.39% cumulatively last week. The 10 - year Treasury bond yield rose 0.51bp compared with the previous Friday, and the 1 - year Treasury bond yield rose 2.50bp compared with the previous Friday, with the term spread narrowing. [4] - On December 29, the local bond issuance plan in Shandong broke the previous expectation of "term contraction" of local bonds, causing concerns about the supply of ultra - long - term bonds. Coupled with the cross - year funding fluctuations, the market sentiment cooled, and the bond market weakened significantly. On December 30, the market sentiment recovered somewhat, ultra - long - term bonds recovered, but medium - and short - term bonds were still weak. On December 31, the official PMI data was better than expected, the market sentiment weakened, and the bond market fluctuated weakly. On January 4, the new regulations on fund fees were implemented, which were significantly more lenient than expected, the market sentiment recovered, and the bond market had a good start. [5] Primary Market - A total of 9 interest - rate bonds were issued last week, the same as the previous week. The issuance volume was 26 billion yuan, a decrease of 184.1 billion yuan compared with the previous week, and the net financing was - 32.6 billion yuan, a decrease of 207.4 billion yuan compared with the previous week. There were no Treasury bonds and policy - financial bonds issued last week, while the issuance volume and net financing of local bonds increased compared with the previous week. The overall subscription demand for interest - rate bonds last week was acceptable, with an average subscription multiple of 6.91 times for 9 local bonds issued. [16][17] Group 3: Last Week's Important Events - In December, China's manufacturing PMI was 50.1%, a rebound of 0.9 percentage points from November; the non - manufacturing business activity index was 50.2%, a rebound of 0.7 percentage points from November; the comprehensive PMI output index was 50.7%, an increase of 1.0 percentage point from November. Driven by factors such as the implementation of growth - stabilizing policies and the resilience of exports, the manufacturing PMI index rebounded significantly in December and returned to the expansion range since April. However, the service industry PMI index only increased slightly and was still in the contraction range, and the weak consumer demand needs further improvement. Looking forward, the supporting effect of growth - stabilizing policies on manufacturing prosperity is expected to continue, and the manufacturing PMI index in January 2026 is expected to remain in the expansion range. [19] Group 4: Real - Economy Observation - Most of the high - frequency data on the production side increased last week. The blast furnace operating rate, the operating rate of petroleum asphalt plants, and the average daily pig iron output all increased, while the semi - steel tire operating rate decreased significantly. From the demand side, the BDI index continued to decline, while the China Containerized Freight Index (CCFI) continued to rise; the sales area of commercial housing in 30 large and medium - sized cities decreased significantly. In terms of prices, pork prices rebounded slightly overall last week, and most commodity prices rose. Among them, copper and rebar prices both increased, while oil prices fell significantly. [20] Group 5: Last Week's Liquidity Observation - The central bank made a net injection of 73.74 billion yuan in the open - market last week. The R007 and DR007 first rose and then fell, with an overall decline; the issuance interest rate of inter - bank certificates of deposit of joint - stock banks decreased slightly overall; the discount interest rates of national and stock - holding banks at all terms increased significantly; the trading volume of pledged repurchase continued to decrease; and the leverage ratio in the inter - bank market fluctuated and decreased. [31][33][35]

Core Viewpoint - The bond market experienced significant weakness on December 29, driven by expectations of supply pressure under a proactive fiscal policy, leading to a decline in government bond futures and an increase in interbank bond yields [1][2]. Market Performance - Government bond futures closed lower across the board, with the 30-year main contract down 0.91% to 111.82, the 10-year main contract down 0.28% to 107.975, and the 5-year main contract down 0.18% to 105.84 [2]. - Interbank bond yields generally rose, with the 30-year government bond yield increasing by 3.65 basis points to 2.255%, and the 10-year government bond yield rising by 2.45 basis points to 1.86% [2]. Funding Conditions - The central bank conducted a reverse repurchase operation of 4,823 billion yuan with a fixed rate of 1.40%, resulting in a net injection of 4,150 billion yuan for the day [6]. - Short-term Shibor rates mostly increased, with the overnight rate down 1.0 basis point to 1.248%, while the 7-day rate rose by 11.0 basis points to 1.558% [6]. Fiscal Policy Insights - The national fiscal work conference emphasized the continuation of a more proactive fiscal policy in 2026, focusing on expanding fiscal spending and optimizing government bond tools [8]. - Key tasks for 2026 include boosting domestic demand, increasing investment in new productive forces, and enhancing basic social safety nets [8]. Institutional Perspectives - Huatai Fixed Income noted that the bond market is likely to remain in a volatile state in the first quarter, with a neutral monetary policy expected and potential for reserve requirement ratio cuts [9]. - CITIC Securities highlighted increased volatility in long-term bond yields and suggested that despite pressures, long-term bonds still offer relative value for allocation [9].