1. Report Industry Investment Rating The provided content does not mention the industry investment rating. 2. Core Viewpoints of the Report - From January 4 - 9, 2026, bond market yields first rose and then fell. Interest - rate bond yields increased across the board, and credit bonds became a safe - haven in the bond market with narrowing credit spreads. AA and below credit spreads mostly narrowed by 3 - 6bp [1][9]. - After the holiday, bond fund redemptions led to large - scale selling of bonds in the secondary market, mainly interest - rate bonds and Tier 2 and perpetual bonds, with a slight increase of 54.1 billion yuan in general credit bonds. Currently, the redemptions of impulsive funds have ended [1][9]. - The allocation demand for general credit bonds from financial management, insurance, money funds, and other asset management institutions has rebounded. Most non - bank institutions are still cautious about the maturity of credit bonds they buy, but other asset management institutions have been snapping up 7 - 10 - year credit bonds since mid - December 2025 [2][10]. - In the short term, due to the increase in market risk appetite during the spring rally, it is difficult to have a trending bond market, and the market may still favor the coupon strategy. It is recommended to focus on medium - and short - term coupon - rich varieties [2][13]. - Bank Tier 2 and perpetual bonds still have room for repair. For trading portfolios, it is recommended to control positions; for allocation portfolios with stable liability ends, 3 - 5 - year Tier 2 and perpetual bonds have cost - effectiveness [3][21]. 3. Summary by Relevant Catalogs 3.1 City Investment Bonds: Jiangsu and Zhejiang County - Level Platforms Contribute to Net Financing Increment, Short - Term Bonds are Preferred - From January 1 - 11, 2026, the net financing of city investment bonds was positive, mainly contributed by county - level platforms in Jiangsu and Zhejiang. The primary issuance sentiment improved, and the proportion of full - field multiples above 3 times increased from 35% to 46% [25]. - In terms of issuance interest rates, there was a divergence among different terms. The medium - and short - term rates stabilized, while the long - term rates continued to rise. The weighted average issuance interest rates for different terms showed different trends compared to the previous month [25]. - In the secondary market, city investment bonds remained resilient. Low - grade short - term bonds performed well, while high - grade 3 - 5 - year bonds performed poorly. The average daily trading volume was relatively high, and short - term, weak - quality varieties were more popular [28][32]. 3.2 Industrial Bonds: Net Financing Decreased Year - on - Year, and the Issuance Interest Rates for Medium - and Long - Term Bonds Continued to Rise - From January 1 - 11, 2026, the issuance and net financing of industrial bonds decreased year - on - year. The food and beverage, construction and decoration, and comprehensive industries had relatively large net financing scales. The issuance sentiment improved [34]. - The proportion of short - term issuance increased significantly. The issuance interest rates for 3 - year and shorter terms decreased, while those for 3 - 5 - year and 5 - year and above terms increased. The buying sentiment from brokers continued to weaken, and the trading duration lengthened [34][36]. 3.3 Bank Tier 2 and Perpetual Bonds: Spreads Narrowed Across the Board, and Trading Sentiment Warmed Up - From January 4 - 9, 2026, there were no new bank Tier 2 and perpetual bonds issued. In the secondary market, yields generally declined by 0 - 4bp, and spreads narrowed across the board. The trading sentiment warmed up slightly [39][42].

Group 1 - The report emphasizes the importance of annual coupon layout, indicating that January may serve as a key window for economic activity due to the late timing of the Spring Festival in February [2][6] - The central bank's stance is described as cautious, with a focus on quantity operations and a relatively stable liquidity environment, suggesting limited conditions for significant liquidity withdrawal [3][6] - The supply-demand structure in the bond market is expected to be relatively balanced, with government bond net financing projected at approximately 3.6 trillion yuan in the first quarter, peaking in January and March [3][6] Group 2 - The report highlights the impact of new fund rate regulations, which are expected to ease market sentiment and favor coupon strategies, with a potential slight decline in yields anticipated [6][7] - The 10-year government bond yield is projected to return to the central bank's focus range of 1.75%-1.85%, while the 30-10 year yield spread is expected to maintain around 40 basis points [7][8] - The report suggests that institutional behavior may create structural opportunities, particularly in the context of the "opening red" effect from banks and insurance companies [4][6]

Report Industry Investment Rating No information provided in the given content. Core Viewpoints - The issuance guidance rates announced by the National Association of Financial Market Institutional Investors during the period from December 22 to December 28, 2025, showed a differentiated trend, with most high - grade rates declining and most medium - and low - grade rates rising, with an overall change range of - 3 BP to 2 BP [1][15][63]. - The issuance scale of credit bonds decreased compared with the previous period. Corporate bonds remained at zero issuance, the issuance amounts of corporate bonds and private placement notes decreased, while the issuance amounts of medium - term notes and commercial paper increased. The net financing of credit bonds decreased compared with the previous period [1][13][63]. - In the secondary market, the trading volume of credit bonds increased compared with the previous period. The trading volumes of corporate bonds, corporate bonds, medium - term notes, and private placement notes increased, while the trading volume of commercial paper decreased [1][19][63]. - The yields of most credit bonds declined during this period. The credit spreads of medium - and short - term notes, corporate bonds, and urban investment bonds were differentiated, with most 1 - year and 7 - year spreads widening and most 3 - year and 5 - year spreads narrowing [1][22][63]. - From the perspective of absolute return, the shortage of supply and relatively strong allocation demand will promote the continued recovery of credit bonds. In the long run, the yields are still in a downward channel, and the idea of increasing allocation during adjustments is still feasible. From the perspective of relative return, although the compression space of credit spreads at all tenors is insufficient, the probability of unilateral callback in the short term is also small. Therefore, it is still possible to achieve the coupon strategy through credit downgrade and extending the duration [1][63]. Summary by Directory 1. Primary Market Situation 1.1 Issuance and Maturity Scale - From December 22 to December 28, 2025, a total of 211 credit bonds were issued, with an issuance amount of 254.432 billion yuan, a 2.51% decrease compared with the previous period. The net financing of credit bonds was 42.433 billion yuan, a decrease of 18.343 billion yuan compared with the previous period [13]. - Corporate bonds had zero issuance, with a net financing of - 6.252 billion yuan, an increase of 0.498 billion yuan compared with the previous period. Corporate bonds issued 74 bonds, with an issuance amount of 49.363 billion yuan, a 46.55% decrease compared with the previous period, and a net financing of 15.757 billion yuan, a decrease of 29.511 billion yuan compared with the previous period. Medium - term notes issued 66 bonds, with an issuance amount of 109.469 billion yuan, a 30.15% increase compared with the previous period, and a net financing of 78.532 billion yuan, an increase of 37.169 billion yuan compared with the previous period. Commercial paper issued 60 bonds, with an issuance amount of 90.117 billion yuan, a 23.36% increase compared with the previous period, and a net financing of - 44.152 billion yuan, a decrease of 25.187 billion yuan compared with the previous period. Private placement notes issued 11 bonds, with an issuance amount of 5.483 billion yuan, a 52.24% decrease compared with the previous period, and a net financing of - 1.452 billion yuan, a decrease of 1.312 billion yuan compared with the previous period [13]. 1.2 Issuance Interest Rates - The issuance guidance rates announced by the National Association of Financial Market Institutional Investors were differentiated, with most high - grade rates declining and most medium - and low - grade rates rising, with an overall change range of - 3 BP to 2 BP. By tenor, the 1 - year variety had an interest rate change range of - 2 BP to 0 BP, the 3 - year variety had an interest rate change range of - 3 BP to 2 BP, the 5 - year variety had an interest rate change range of - 3 BP to 2 BP, and the 7 - year variety had an interest rate change range of - 2 BP to 1 BP. By grade, the key AAA - grade and AAA - grade varieties had an interest rate change range of - 3 BP to - 1 BP, the AA + - grade variety had an interest rate change range of - 1 BP to 2 BP, the AA - grade variety had an interest rate change range of 0 BP to 2 BP, and the AA - - grade variety had an interest rate change range of 0 BP to 1 BP [15]. 2. Secondary Market Situation 2.1 Market Trading Volume - From December 22 to December 28, 2025, the total trading volume of credit bonds was 1.030617 trillion yuan, a 7.72% increase compared with the previous period. Corporate bonds, corporate bonds, medium - term notes, commercial paper, and private placement notes traded 28.754 billion yuan, 446.075 billion yuan, 347.636 billion yuan, 145.597 billion yuan, and 62.555 billion yuan respectively [19]. 2.2 Credit Spreads - In medium - and short - term notes, the credit spreads of each variety were differentiated. The 1 - year credit spreads widened; among the 3 - year notes, the credit spreads of AA - grade and AA - - grade widened, while the spreads of AAA - grade and AA + - grade narrowed; the 5 - year credit spreads narrowed; among the 7 - year notes, the credit spread of AAA - grade narrowed, while the spread of AA + - grade widened [22]. - In corporate bonds, the credit spreads of each variety were differentiated. The 1 - year AAA - grade credit spread narrowed, while the spreads of other varieties widened; among the 3 - year notes, the credit spreads of AAA - grade and AA + - grade narrowed, while the spreads of AA - grade and AA - - grade widened; the 5 - year credit spreads narrowed; among the 7 - year notes, the credit spread of AAA - grade narrowed, while the spreads of other varieties widened [27]. - In urban investment bonds, the credit spreads of each variety were differentiated. The 1 - year credit spreads widened; the 3 - year credit spreads narrowed; among the 5 - year notes, the credit spreads of AAA - grade and AA + - grade narrowed, while the spreads of AA - grade and AA - - grade widened; among the 7 - year notes, the credit spread of AAA - grade narrowed, while the spreads of other varieties widened [37]. 2.3 Term Spreads and Rating Spreads - For AA + medium - and short - term notes, the 3Y - 1Y term spread narrowed by 1.20 BP, the 5Y - 3Y term spread narrowed by 3.20 BP, and the 7Y - 3Y term spread widened by 3.22 BP. The 3Y - 1Y term spread was at a low - to - middle historical percentile (21.6%), the 5Y - 3Y term spread was at a low - to - middle historical percentile (34.5%), and the 7Y - 3Y term spread was at a historical median (41.9%). In terms of rating spreads, the (AA - )-(AAA) spread of 3 - year medium - and short - term notes widened by 3.00 BP, the (AA)-(AAA) spread widened by 3.00 BP, and the (AA + )-(AAA) spread widened by 2.00 BP [47]. - For AA + corporate bonds, the 3Y - 1Y term spread narrowed by 3.69 BP, the 5Y - 3Y term spread widened by 3.12 BP, and the 7Y - 3Y term spread widened by 8.55 BP. The 3Y - 1Y term spread was at a historical low (12.2%), the 5Y - 3Y term spread was at a low - to - middle historical percentile (36.3%), and the 7Y - 3Y term spread was at a historical median (42.9%). In terms of rating spreads, the (AA - )-(AAA) spread of 3 - year corporate bonds widened by 6.00 BP, the (AA)-(AAA) spread widened by 6.00 BP, and the (AA + )-(AAA) spread remained unchanged from the previous period [52]. - For AA + urban investment bonds, the 3Y - 1Y term spread narrowed by 0.72 BP, the 5Y - 3Y term spread narrowed by 1.67 BP, and the 7Y - 3Y term spread widened by 2.25 BP. The 3Y - 1Y term spread was at a low - to - middle historical percentile (20.3%), the 5Y - 3Y term spread was at a low - to - middle historical percentile (31.2%), and the 7Y - 3Y term spread was at a historical median (46.8%). In terms of rating spreads, the (AA - )-(AAA) spread of 3 - year urban investment bonds narrowed by 1.00 BP, the (AA)-(AAA) spread widened by 1.00 BP, and the (AA + )-(AAA) spread remained unchanged from the previous period [54]. 3. Credit Rating Adjustment and Default Bond Statistics 3.1 Credit Rating Adjustment Statistics - From December 22 to December 28, 2025, a total of 2 companies had their ratings (including outlooks) adjusted, both of which were upgrades. They were Wenzhou Transportation Development Group Co., Ltd. and Guangxi Energy Group Co., Ltd. [60]. 3.2 Default and Extension Bond Statistics - There were no credit bond defaults during the period from December 22 to December 28, 2025. One issuer, Bohai Leasing Co., Ltd., had its credit bonds extended, namely "18 Bojin 03" and "18 Bozu 05", with a total bond balance of 823 million yuan at the time of extension [62]. 4. Investment Viewpoints - The overall idea is to continue to be optimistic about the credit bond market in the long term, but pay attention to short - term fluctuations. In terms of configuration, the coupon strategy can be moderately optimistic, and the trading strategy can be kept optimistic. When selecting bonds, focus on the trend of interest - rate bonds and the coupon value of individual bonds. At the same time, it is possible to achieve the coupon strategy through credit downgrade and extending the duration according to one's own capital characteristics, but pay attention to the rhythm [1][63].

Group 1 - The core viewpoint of the article suggests that the equity market's year-end rally may have started, influenced by a strong commodity market led by precious metals, which could further impact the logic of asset scarcity in the bond market [1][14]. - The report indicates that the 10-year government bond yield has remained stable, with recent fluctuations reflecting a broader trend of liquidity in the market [2][18]. - The equity market has shown signs of a year-end rally, with the Shanghai Composite Index experiencing a series of gains, suggesting a potential upward trend similar to past market behaviors [3][6][13]. Group 2 - The article highlights that the core asset rally has driven the Shanghai Composite Index, with historical comparisons showing significant gains during previous year-end rallies [6][9]. - Multiple factors are driving the strength of the equity market, including a globally accommodative monetary policy, a K-shaped economic recovery, and increased investor preference for stable earnings from leading companies [9][10][13]. - The article notes that the current low interest rate environment is favorable for equity market valuations, and there is a potential for a positive feedback loop in the market as funds flow into core assets [13][14]. Group 3 - The bond market is facing challenges as the equity market gains momentum, with the article suggesting that the logic of asset scarcity may weaken, leading to potential outflows from bonds [14][18]. - The report emphasizes that the importance of coupon income is increasing in the current volatile bond market, making a buy-and-hold strategy for high-coupon credit bonds more attractive [18][19]. - The average yield of pure bond funds for the year is reported at 1.44%, indicating that achieving standout performance in the bond market is becoming increasingly difficult [18][19].

Group 1 - The core viewpoint suggests seizing the certainty of short to medium-term credit bond arbitrage value and focusing on the rebound in valuation cost-effectiveness of component bonds [1] - In a volatile adjustment market with loose liquidity, the coupon strategy may be relatively superior, and it is recommended to pay attention to credit bond participation opportunities around 3 years [1] - The adjustment of component bonds has been significant, influenced by some banks' proprietary redemption of credit bond ETFs, leading to a convergence of premiums with non-component bonds [1] Group 2 - As of December 12, 2025, the company bond ETF (511030) has risen by 0.02%, achieving four consecutive increases, with the latest price at 106.61 yuan, and a year-to-date increase of 1.44% [4] - The trading volume of the company bond ETF was active, with an intraday turnover of 11.31% and a transaction value of 3.065 billion yuan, while the average daily transaction over the past week was 2.574 billion yuan [4] - The latest scale of the company bond ETF reached 27.093 billion yuan, marking a new high in nearly a year, with the latest share count at 254 million, also a new high in the past six months [4] Group 3 - The company bond ETF closely tracks the China Bond - Medium to High Grade Corporate Bond Spread Factor Index, which serves as a performance benchmark for investing in medium to high-grade corporate bonds [5] - The index is based on AAA-rated corporate bonds and is adjusted quarterly, providing a multi-dimensional reflection of the RMB bond market trends [5]

Core Viewpoint - The overall credit risk is expected to remain controllable in 2026, with low spreads and high volatility likely to continue [1]. Supply Side - The issuance policy for local government financing vehicles (LGFVs) is tightening, leading to a net outflow of LGFV bonds, with issuance scale expected to decline over the next two years [1]. - Central enterprises are continuing to increase leverage, contributing significant incremental supply of medium to long-term industrial bonds [1]. - The pace of bank balance sheet expansion is slowing, with weakened capital replenishment motivation; some small and medium-sized banks may still require capital supplementation [1]. Demand Side - The shift to net value-based wealth management and adjustments in fund fee rates are affecting the stability of institutional liabilities and bond allocation preferences, with stable demand for medium to short-term credit bonds, outperforming long-term bonds [2]. - During periods of interest rate fluctuations, coupon income becomes crucial. Since 2022, credit strategy portfolios have outperformed interest rate strategy portfolios, with short-term strategies performing better than duration strategies [2]. - It is recommended to focus on medium to short-term credit bonds to explore coupon income, while also monitoring event/policy impacts for trading opportunities in medium to long-term varieties [2]. Specific Bond Strategies - **LGFV Bonds**: Continue with a short to medium duration coupon strategy, focusing on local bonds and the progress of LGFV transformations. Bonds with medium credit quality should be primarily in the 2-3 year range, while higher-rated LGFV platforms can extend to 4-5 years, considering local debt progress and financial resource endowments [2]. - **Perpetual Bonds**: The trading value and riding space of the curve are emphasized. Although volatility has decreased compared to previous years, perpetual bonds from state-owned banks still hold trading value. Opportunities during significant price drops and riding space on the curve should be monitored [2]. - **Industrial Bonds**: Focus on high-grade central enterprise bonds with a duration strategy, while coal and steel bonds should prioritize coupon strategies. The leverage increase among central enterprises will continue to contribute significant incremental supply [3]. - **Real Estate Bonds**: A defensive allocation strategy is recommended, as the sector's fundamentals still require improvement. The strategy should focus on high-quality central and state-owned real estate bonds maturing within two years, with ongoing monitoring of liquidity, sales recovery, debt maturity schedules, and financing channel changes [3].

Core Viewpoint - The article emphasizes the importance of understanding economic cycles and adapting investment strategies accordingly, focusing on the interplay between risk and return, and the need for a dynamic asset allocation approach to navigate the evolving market landscape [1][2][3]. Group 1: Strategy Implementation - Investment strategies should be clearly planned at the end of each year, balancing proactive measures with responsive tactics to adapt to market changes [1]. - The essence of asset management strategies lies in seeking a dynamic balance among profitability, liquidity, and safety, transforming vague wealth goals into actionable frameworks [3]. Group 2: 2025 Strategy Review - The major shift in asset allocation for 2025 was driven by a change in risk premiums, transitioning from "conflict premium" to "repair premium" due to the stabilization of US-China trade tensions [4]. - AI+ technology is identified as a core driver of structural opportunities across various sectors, enhancing production efficiency and creating a viable industrial dividend chain [5]. - A supportive funding environment characterized by abundant liquidity has facilitated the concentration of capital in high-certainty and high-growth areas, enhancing the returns on quality assets [6]. Group 3: 2026 Asset Allocation Strategy - The risk premium for Chinese assets is expected to continue its downward trend, supported by the stabilization of external conflicts and the resonance of institutional reforms [10]. - The liquidity environment is anticipated to shift from abundance to structural adaptation, with a focus on high-certainty sectors, necessitating a refined asset selection approach [11]. - The correlation between inflation and profitability is expected to highlight the value of yield strategies, making fixed-income assets a key choice for stable returns [12]. - The focus of fiscal policy is projected to shift towards stability and social welfare, emphasizing structural opportunities over total economic growth [13]. - The narrative-driven trading approach is expected to weaken, with a shift towards profitability verification as the primary driver for industry selection [14]. Group 4: Key Conclusions for 2026 - The effective asset allocation strategy for 2026 is rooted in the interplay of declining risk premiums, rising profitability, and structural differentiation [16]. - The focus will be on midstream industries, which are expected to benefit from improved profitability and resilience against demand fluctuations [17]. - The use of tools like ETFs will remain crucial for efficiently capturing structural opportunities in specific sectors [17].

Group 1 - The report outlines four phases of market dynamics affecting credit bonds, with the first phase characterized by a tight monetary policy and rising credit bond yields, followed by a recovery phase where yields compress due to increased institutional demand [6][8] - The report highlights a significant shift in credit bond strategies, indicating that during periods of rising interest rates, credit strategies outperform duration strategies, with short-end bonds performing better than long-duration strategies [9][11] - The report notes that the traditional credit cycle has led to a divergence in financing sources, with a notable shift towards central enterprises and a decrease in local government financing, indicating a two-tiered market for credit bonds [19][22] Group 2 - The report emphasizes the impact of the "anti-involution" policy on various industries, suggesting that while it aims to improve market efficiency, it requires complementary demand-side policies to be effective [27] - The report discusses the tightening of issuance policies for urban investment bonds, predicting a significant drop in supply over the next two years, which may affect market liquidity and pricing [19][22] - The report identifies that the financing trend for industrial bonds is expected to continue, driven by central government initiatives and a focus on "real industry" financing, with central enterprises dominating the issuance landscape [21][22] Group 3 - The report indicates that the financial sector may see a stabilization of net interest margins due to supportive central bank policies, which could enhance the market position of leading city commercial banks [25][31] - The report suggests that the technology sector, particularly in electrical and hardware equipment, will benefit from favorable policy environments, with a recommendation to maintain a duration of around three years for investments in this sector [31][33] - The report highlights the importance of monitoring the cyclical nature of demand in the steel and coal industries, suggesting that any signs of recovery should be closely observed for potential investment opportunities [31]

1. Report Industry Investment Rating No information provided in the content. 2. Core Viewpoints of the Report - Last week, interest rate bonds fluctuated slightly weaker, and credit bonds adjusted synchronously with interest rates but declined more significantly. This might be due to the continuous fermentation of the Vanke incident, causing the market's credit risk preference to turn cautious [2][10]. - After three weeks of phased adjustment, the "volatility amplifier" characteristic of Tier 2 and perpetual bonds reappeared, with a decline higher than that of general - credit bonds and interest - rate bonds of the same maturity. There is a certain opportunity for left - side participation [3][18]. - The selling pressure of ultra - long - term credit bonds was strong last week. The market became more cautious about duration at the end of the year. The Vanke incident made the market more risk - averse, and investment institutions' willingness to invest in real - estate and related sectors decreased [4][22]. - Currently, the coupon strategy is still the best. After the recent adjustment, about 28.7% of the 1 - 3 - year credit bonds with implied ratings of AA and AA(2) have yields between 2.2% - 2.6%, leaving some room for bond selection. It is still not advisable to pursue ultra - long - term credit bonds. For allocation portfolios with a more stable liability side, the Tier 2 and perpetual bonds of large state - owned banks with a maturity of 3 - 5 years can be considered for appropriate participation [5][34]. 3. Summary According to Relevant Catalogs 3.1 Bond Market Performance - **Interest Rate and Credit Bond Yield Changes**: From December 1 to December 5, 2025, the 1Y, 2Y, 3Y, 4Y, and 5Y Treasury bond yields changed by - 0.0BP, - 1.5BP, - 1.5BP, - 0.2BP, and + 1.4BP respectively, while the yields of the same - maturity AAA medium - term notes increased by 1.1BP, 2.6BP, 2.9BP, 2.6BP, and 3.7BP respectively, and AA + medium - term notes increased by 2.1BP, 3.6BP, 1.9BP, 3.6BP, and 4.7BP respectively [10]. - **Ultra - long - term Credit Bond Performance**: The decline of ultra - long - term credit bonds was higher than that of general - credit bonds and interest - rate bonds of the same maturity. The 7Y performance was generally better than that of the 10Y. The yields of 10Y AAA/AA + medium - term notes increased by 4.18BP, the yields of 10Y AAA/AA + urban investment bonds increased by 5.80BP and 7.79BP respectively, and the yield of 10Y AAA - bank Tier 2 capital bonds increased by 8.54BP, while the 10Y Treasury bond yield increased by 0.68BP [12]. 3.2 Yield Curve and Historical Quantiles - **Yield Curve Steepness**: The steepness of the 1 - 2 - year yield curve was the highest for all ratings, and the 2 - 3 - year steepness of low - grade bonds was also relatively high. For AA + medium - term notes, the slopes of the 1 - 2 - year, 2 - 3 - year, and 3 - 5 - year intervals were 0.1433, 0.0837, and 0.0748 respectively; for AA urban investment bonds, they were 0.1476, 0.1402, and 0.0864 respectively [13]. - **Historical Quantiles**: The protection cushion of 3 - 5Y general - credit bonds has increased, and they currently have a certain cost - effectiveness. From December 1 to December 5, 2025, the valuation yields to maturity of 1Y - AAA, 3Y - AAA, 5Y - AAA, 1Y - AA +, 3Y - AA +, 5Y - AA +, 1Y - AA, and 3Y - AA ChinaBond medium - and short - term notes were at the 27.27%, 39.87%, 43.38%, 23.34%, 35.74%, 38.84%, 20.04%, and 30.99% levels since 2024. The historical quantiles of their credit spreads were 7.85%, 19.21%, 22.31%, 7.02%, 12.80%, 14.04%, 6.81%, and 17.76% respectively [15]. 3.3 Tier 2 and Perpetual Bonds - **Yield Changes**: The yields of 1 - 5Y, 7Y, and 10Y AAA - bank Tier 2 capital bonds increased by 2.98BP, 3.18BP, 7.48BP, 7.65BP, 4.97BP, 6.64BP, and 8.54BP respectively. The part with a maturity of 4 years and above is still 45BP - 65BP away from the lowest yield point since 2025. Compared with the sharp decline at the end of July, the yield points of varieties with a maturity of over 2 years are higher than the previous round [18]. - **Trading Activity**: Last week, the long - and short - side forces in the market were relatively balanced, and the market fluctuated repeatedly. From December 1 to December 5, the proportion of low - valuation transactions of Tier 2 and perpetual bonds was 100.00%, 5.00%, 50.00%, 0.00%, and 100.00% respectively; the average transaction duration was 4.62 years, 1.29 years, 2.23 years, 0.68 years, and 6.14 years respectively. The amplitude of transactions below the valuation was generally low, within 2.5BP, and the amplitude of discount transactions was also mostly within 3BP [19]. 3.4 Ultra - long - term Credit Bond Transactions - **Discount Transactions**: From December 1 to December 5, the proportion of discount transactions of ultra - long - term credit bonds was 25.00%, 60.00%, 65.00%, 80.00%, and 57.50% respectively. About 30.5% of the discount transaction amplitudes were above 4BP, mainly individual bonds with credit flaws such as AVIC Industry - Finance, and there were also many discount transactions of Shenzhen Metro above 4BP [22]. - **Transactions Below Valuation**: The willingness to buy ultra - long - term credit bonds was not strong, and the focus of market trading was still on low - quality urban investment bonds. About 30% of the transactions below the valuation had an amplitude of 3BP or more, but the proportion of ultra - long - term credit bonds was not high. Transactions with an amplitude of 3BP or more were mainly 2 - 5Y AA(2) and AA - low - quality urban investment bonds [23][25]. 3.5 Institutional Behavior - **General - credit Bonds**: Public funds and wealth management products mainly increased their holdings of general - credit bonds in the short - and medium - term, mainly within 3 years. Last week, funds net - bought 59.40 billion yuan of credit bonds within 1 year and 53.40 billion yuan of 1 - 3Y credit bonds, and were in a state of net - selling for credit bonds over 7 years. Wealth management products mainly net - bought 90.99 billion yuan of credit bonds within 1 year and 26.79 billion yuan of 1 - 3Y credit bonds [27]. - **Tier 2 and Perpetual Bonds**: The selling pressure of public funds and insurance companies on Tier 2 and perpetual bonds has weakened, and the buying power of wealth management products is not strong. Other asset management products are the main force for increasing holdings. Last week, fund companies net - sold 93.9 billion yuan of Tier 2 and perpetual bonds, insurance companies net - sold 40.1 billion yuan, and bank wealth management products net - bought 36 billion yuan. Only other products net - bought 197.4 billion yuan [27].

Summary of Conference Call on Long-term Bonds Industry Overview - The conference call focuses on the long-term bond market, particularly the super long bonds, which are currently experiencing volatility due to supply expectations and weak demand [1][2]. Key Points and Arguments 1. **Market Sentiment and Interest Rates** - The sentiment in the super long bond market is negatively impacted by supply expectations and weak demand, leading to rising interest rates, especially for super long bonds [1][2]. - A short-term rebound opportunity exists, but long-term factors such as allocation strength and interest rate cut expectations limit this rebound potential [1][3]. 2. **Future Monetary Policy Expectations** - It is anticipated that monetary policy may become more accommodative in 2026, with clearer easing expectations emerging around March-April, while January-February may show less clarity [1][4]. 3. **Current Bond Recommendations** - Liquid super long bonds currently include T6, T2, and 25 ordinary government bonds [1][5]. - The 30-year old bonds, such as 25 special 5 and 25 special 6, show a yield spread of over 10 basis points, indicating holding value, but the compression speed of this spread may be slow [1][5]. 4. **Investment Strategies** - Suggested strategies include a low-duration defensive approach combined with a coupon strategy, focusing on two-year credit bonds and the potential rebound of 30-year government bonds [3][10]. - For short-term high-frequency trading, the most liquid bond is 25 special 6, while 2,502 bonds are recommended for slightly longer-term holds [8][9]. 5. **Liquidity and Future Issuance of Bonds** - The future liquidity of 2,502 bonds is uncertain, with potential issuance in 2026 estimated to reach between 250 billion to 300 billion, which could enhance its status as an active bond [6][7]. 6. **Short-term Investment Strategies** - Current market conditions favor short-term investments in three-month certificates of deposit due to favorable coupon rates [9]. - A combination of three-month and one-year certificates is recommended for better value [9]. 7. **Credit and Local Government Bonds** - For local government bonds, focus on new bonds with an implied tax rate above 4%, and for credit bonds, consider three-year secondary capital bonds and the spread with three-year national development bonds [12]. 8. **Floating Rate Bonds and Hedging Strategies** - Floating rate bonds are currently overpriced, but specific types like 25 Longfa XFL09 still hold value [13]. - A hedging strategy involving buying five-year national development bonds and shorting government bond futures could yield around 1.95% returns, providing a stable risk-return profile [13]. Additional Important Insights - The overall market environment presents unique opportunities across various bond types, including long-term government bonds and local government special bonds, which should be analyzed based on implied tax rates and regional economic conditions [15]. - The differentiation in performance among main bonds indicates a need for careful selection based on liquidity premiums and potential returns [11].