Core Insights - The article emphasizes the importance of focusing on the cyclical resonance of the Kondratiev and Juglar cycles to capture long-term trend opportunities in asset allocation for 2026 [1][18] - It advocates for a defensive base using high-quality fixed-income assets in a low-interest-rate environment to hedge against inventory cycle risks [1][18] - The article suggests that structural opportunities should be prioritized over total volume, avoiding real estate adjustments and traditional capacity clearance while embracing policy guidance and technological iteration [1][18] Strategy Implementation Rules - Clear planning for the next year's strategy is essential, balancing "strategy" and "action" to achieve the highest level of execution [19] - Understanding asset pricing fundamentals is necessary but not sufficient; strategies must focus on future pricing rather than past norms [20] - The core of investment lies in balancing risk and return, with a disciplined approach to risk management being paramount [20] 2025 Strategy Review - The restructuring of risk premiums was a significant change in asset allocation for 2025, transitioning from "conflict premium" to "repair premium" due to the stabilization of US-China trade tensions [22] - AI+ has emerged as a core technology driving structural opportunities across various sectors, enhancing production efficiency and demand scenarios [23] - A supportive funding environment characterized by abundant liquidity has facilitated the concentration of capital in high-certainty and high-growth areas [24] 2026 Asset Allocation Strategy - The risk premium for Chinese assets is expected to continue its downward trend, supported by the "15th Five-Year Plan" and adjustments in US global competition strategies [27] - Liquidity conditions are shifting from abundance to structural adaptation, with a focus on high-certainty sectors [28] - The alignment of inflation and profitability is expected to highlight the value of yield strategies, making fixed-income assets a core choice for asset allocation [29] - The focus will shift from total economic volume to structural opportunities, with fiscal policy expected to play a more significant role than monetary policy [30] - The narrative-driven trading approach is anticipated to weaken, with market pricing returning to profitability verification as the core driver [31] - The strategy will evolve towards a focus on midstream industries, driven by policies that constrain supply and enhance profitability [32] 2026 Asset Allocation Conclusions - The effectiveness of the 2026 asset allocation strategy is rooted in the threefold resonance of declining risk premiums, rising profitability, and structural differentiation [14] - The allocation will emphasize yield strategies while focusing on midstream manufacturing and technology-enabled sectors [14] - Industry selection will hinge on three dimensions: certainty of profitability recovery, overseas business share, and adaptability to technological innovation [15] - Tools like ETFs will remain efficient vehicles for implementing strategies and capturing structural opportunities in niche areas [16]

1. Report Industry Investment Rating No relevant information provided. 2. Core Viewpoints of the Report - In the current period (December 1 - 7, 2025), most of the issuance guidance rates announced by the National Association of Financial Market Institutional Investors declined, with an overall change range of -6 BP to 2 BP. The issuance scale of credit bonds decreased month - on - month. The issuance amount of enterprise bonds increased, while that of other varieties decreased. The net financing of credit bonds decreased month - on - month, with the net financing of enterprise bonds and commercial paper increasing, and that of other varieties decreasing. The net financing of enterprise bonds was negative, while that of other varieties was positive [2][13][60]. - In the secondary market, the trading amount of credit bonds decreased month - on - month. The trading amounts of private placement notes and commercial paper increased, while those of other varieties decreased. The yields of credit bonds all increased in the current period. The credit spreads of medium - and short - term notes, enterprise bonds, and urban investment bonds were differentiated, generally showing a widening at the short end and a narrowing at the medium - and long - ends [2][17][60]. - From the perspective of absolute returns, insufficient supply and relatively strong allocation demand will drive the credit bond market to continue its recovery. Although fluctuations and adjustments are inevitable under the influence of multiple factors, the conditions for a full - scale bear market in the credit bond market are still insufficient. In the long run, yields are still in a downward channel, and the strategy of increasing positions during adjustments is still feasible. Currently, the cost - effectiveness of most varieties for allocation has decreased, and caution is needed when chasing high prices. The coupon strategy can be moderately optimistic in the current allocation thinking, and the trading thinking should remain optimistic. When selecting bonds, the focus should be on the trend of interest - rate bonds while paying attention to the coupon value of individual bonds. From the perspective of relative returns, although the compression space of credit spreads at all tenors is insufficient at present, the probability of a one - sided correction in the short term is also low. Therefore, investors can still achieve the coupon strategy through credit - quality downgrading and extending the duration according to their own capital characteristics, but they need to pay attention to the rhythm during allocation [2][60]. - The central and local governments have been continuously optimizing real estate policies. The support policies have been continuously strengthened, actively releasing rigid and improving housing demand, which has played a positive role in promoting the stabilization of the real estate market. Although the real estate market is still in the transition period between the old and new models, with the effectiveness of various policies to stabilize the property market, the real estate market is moving towards stabilization. In the future, policies to promote the high - quality development of the real estate market are expected. For real estate bonds, the sales recovery process will have a significant impact on bond valuations. As the market shows signs of stabilization, funds with higher risk appetite can consider early layout, especially focusing on enterprises with outstanding performance in new financing and sales recovery. The focus of allocation should still be on central and state - owned enterprises with stable historical valuations and excellent performance, as well as high - quality private - enterprise bonds with strong guarantees. Investors can extend the duration to increase returns and also appropriately play the trading opportunities brought by the valuation repair of bonds of undervalued real - estate enterprises [3][61]. - For urban investment bonds, under the principle of coordinating development and security, the probability of default of urban investment bonds is very low, and they can still be a key allocation variety of credit bonds. Under the strict supervision of promoting the clearance of local financing platforms in an orderly and effective manner, the reform and transformation of financing platforms are accelerating. Attention should be paid to the reform and transformation opportunities of "entity - type" financing platforms. From the perspective of coupon income, investors can be appropriately active. The allocation strategy can give priority to credit - quality downgrading at the medium - and short - ends, and the trading strategy can still choose to extend the duration of medium - and high - grade bonds [4][61][62]. 3. Summary According to Relevant Catalogs 3.1 Primary Market Situation 3.1.1 Issuance and Maturity Scale - In the current period (December 1 - 7, 2025), a total of 291 credit bonds, including enterprise bonds, corporate bonds, medium - term notes, commercial paper, and private placement notes, were issued, with an issuance amount of 232.914 billion yuan, a month - on - month decrease of 32.35%. The net financing of credit bonds was 54.159 billion yuan, a month - on - month decrease of 6.974 billion yuan [13]. - By variety, 1 enterprise bond was issued, with an issuance amount of 1 billion yuan and a net financing of - 3.292 billion yuan, a month - on - month increase of 3.854 billion yuan. 110 corporate bonds were issued, with an issuance amount of 75.694 billion yuan, a month - on - month decrease of 6.20%, and a net financing of 17.749 billion yuan, a month - on - month decrease of 8.128 billion yuan. 78 medium - term notes were issued, with an issuance amount of 61.583 billion yuan, a month - on - month decrease of 62.30%, and a net financing of 14.611 billion yuan, a month - on - month decrease of 81.694 billion yuan. 80 commercial papers were issued, with an issuance amount of 82.462 billion yuan, a month - on - month decrease of 1.88%, and a net financing of 24.686 billion yuan, a month - on - month increase of 23.237 billion yuan. 22 private placement notes were issued, with an issuance amount of 12.175 billion yuan, a month - on - month decrease of 24.73%, and a net financing of 405 million yuan, a month - on - month decrease of 709 million yuan [13]. 3.1.2 Issuance Interest Rates - Most of the issuance guidance rates announced by the National Association of Financial Market Institutional Investors declined, with an overall change range of -6 BP to 2 BP. By tenor, the interest rate of 1 - year varieties changed from -6 BP to 1 BP, that of 3 - year varieties changed from -5 BP to 2 BP, that of 5 - year varieties changed from -5 BP to 0 BP, and that of 7 - year varieties changed from -3 BP to 0 BP. By rating, the interest rate of key AAA - rated and AAA - rated varieties changed from -2 BP to 2 BP, that of AA + - rated varieties changed from -1 BP to 0 BP, that of AA - rated varieties changed from -3 BP to -2 BP, and that of AA - - rated varieties changed from -6 BP to -3 BP [15]. 3.2 Secondary Market Situation 3.2.1 Market Trading Volume - In the current period (December 1 - 7, 2025), the total trading amount of credit bonds was 817.532 billion yuan, a month - on - month decrease of 7.60%. The trading amounts of enterprise bonds, corporate bonds, medium - term notes, commercial paper, and private placement notes were 17.007 billion yuan, 317.964 billion yuan, 281.89 billion yuan, 144.869 billion yuan, and 55.802 billion yuan respectively. The trading amount of credit bonds decreased month - on - month. The trading amounts of private placement notes and commercial paper increased, while those of other varieties decreased [17]. 3.2.2 Credit Spreads - For medium - and short - term notes, the credit spreads of each variety were differentiated. Specifically, the credit spreads of 1 - year and 5 - year notes widened, while those of 3 - year and 7 - year notes narrowed [20]. - For enterprise bonds, the credit spreads of each variety were differentiated. Specifically, the 1 - year credit spread widened; among the 3 - year bonds, the credit spread of AA + - rated varieties widened, while those of other varieties narrowed; among the 5 - year bonds, the credit spreads of AAA - rated and AA - - rated varieties narrowed, while those of AA + - rated and AA - rated varieties widened; the 7 - year credit spread narrowed [27]. - For urban investment bonds, the credit spreads of each variety were differentiated. Specifically, the 1 - year credit spread widened; among the 3 - year bonds, the credit spread of AA - - rated varieties widened, while those of other varieties narrowed; among the 5 - year bonds, the credit spread of AA + - rated varieties widened, while those of other varieties narrowed; the 7 - year credit spread narrowed [36]. 3.2.3 Term Spreads and Rating Spreads - For AA + medium - and short - term notes: In terms of term spreads, the 3Y - 1Y spread narrowed by 0.26 BP, the 5Y - 3Y spread widened by 2.87 BP, and the 7Y - 3Y spread widened by 1.94 BP. Currently, the 3Y - 1Y spread is at a relatively low historical level, at the 32.1% quantile, the 5Y - 3Y spread is at a relatively low historical level, at the 23.6% quantile, and the 7Y - 3Y spread is at a relatively low historical level, at the 29.0% quantile. In terms of rating spreads, the (AA - )-(AAA) spread of 3 - year medium - and short - term notes narrowed by 2.00 BP, the (AA)-(AAA) spread narrowed by 1.00 BP, and the (AA + )-(AAA) spread narrowed by 1.00 BP. Currently, the (AA - )-(AAA) spread is at a historical low, at the 0.0% quantile, the (AA)-(AAA) spread is at a historical low, at the 3.7% quantile, and the (AA + )-(AAA) spread is at a low level, at the 1.0% quantile [44]. - For AA + enterprise bonds: In terms of term spreads, the 3Y - 1Y spread widened by 2.92 BP, the 5Y - 3Y spread widened by 1.28 BP, and the 7Y - 3Y spread narrowed by 2.23 BP. Currently, the 3Y - 1Y spread is at a relatively low historical level, at the 31.7% quantile, the 5Y - 3Y spread is at a relatively low historical level, at the 26.5% quantile, and the 7Y - 3Y spread is at a relatively low historical level, at the 28.2% quantile. In terms of rating spreads, the (AA - )-(AAA) spread of 3 - year enterprise bonds narrowed by 1.00 BP, the (AA)-(AAA) spread remained the same as the previous period, and the (AA + )-(AAA) spread widened by 2.00 BP. Currently, the (AA - )-(AAA) spread is at a historical low, at the 0.7% quantile, the (AA)-(AAA) spread is at a historical low, at the 6.1% quantile, and the (AA + )-(AAA) spread is at a historical low, at the 1.5% quantile [50]. - For AA + urban investment bonds: In terms of term spreads, the 3Y - 1Y spread narrowed by 0.99 BP, the 5Y - 3Y spread widened by 1.12 BP, and the 7Y - 3Y spread narrowed by 0.73 BP. Currently, the 3Y - 1Y spread is at a relatively low historical level, at the 36.2% quantile, the 5Y - 3Y spread is at a relatively low historical level, at the 24.4% quantile, and the 7Y - 3Y spread is at a relatively low historical level, at the 30.1% quantile. In terms of rating spreads, the (AA - )-(AAA) spread of 3 - year urban investment bonds widened by 1.99 BP, the (AA)-(AAA) spread widened by 0.99 BP, and the (AA + )-(AAA) spread narrowed by 0.01 BP. Currently, the (AA - )-(AAA) spread is at a historical low, at the 10.1% quantile, the (AA)-(AAA) spread is at a historical low, at the 5.4% quantile, and the (AA + )-(AAA) spread is at a historical low, at the 0.8% quantile [53]. 3.3 Credit Rating Adjustment and Default Bond Statistics 3.3.1 Credit Rating Adjustment Statistics - According to iFinD statistics, there were no company rating (including outlook) adjustments in the current period (December 1 - 7, 2025) [58]. 3.3.2 Default and Extended - Maturity Bond Statistics - In terms of bond defaults, according to iFinD statistics, there were no credit bond defaults in the current period (December 1 - 7, 2025). - In terms of bond extensions, according to iFinD statistics, there were no credit bond extensions in the current period (December 1 - 7, 2025) [59]. 3.4 Investment Views - The views are consistent with the core viewpoints of the report, including the analysis of the primary and secondary markets of credit bonds, the judgment of the credit bond market from the perspectives of absolute and relative returns, the analysis of the real estate market and real estate bonds, and the analysis of urban investment bonds [60][61][62].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - Year - end allocation of ultra - long bonds is weak. The problem of insufficient ultra - long bond underwriting has intensified this week, driving up the 30Y Treasury bond rate. Although some institutions have increased their allocation, funds still have weak buying power due to redemption pressure [1][10]. - Banks' willingness to allocate ultra - long bonds in the secondary market has decreased due to primary underwriting and IRRBB assessment pressure. Insurance funds continue the trend of stock - bond rebalancing and focus on local bonds and long - term credit bonds [1]. - There are feasible paths to solve the ultra - long bond underwriting problem, such as controlling the duration of new government bonds, central bank's purchase of ultra - long Treasury bonds, guiding non - bank funds to participate in subscriptions, and reducing the pressure on banks' book interest rate risk indicators [2]. - The central bank maintains a supportive attitude. The carry trade strategy is dominant, and investors can moderately participate in band trading after adjustments [2]. 3. Summary by Relevant Catalogs 3.1 Review Summary and Bond Market Outlook - This week, the bond market sentiment was weak, with the 10Y and 30Y Treasury bond rates rising by 1bp and 7bp respectively. The market showed different trends on different days due to factors such as PMI data, stock market performance, and policy expectations [9]. - The allocation of ultra - long bonds at the year - end is weak. Banks' willingness to allocate ultra - long bonds in the secondary market has decreased, and insurance funds focus on local bonds and long - term credit bonds [1][10]. - There are feasible paths to solve the ultra - long bond underwriting problem, and the central bank's supportive attitude remains unchanged. The carry trade strategy is dominant, and investors can moderately participate in band trading [2][24]. 3.2 Bond Market Review 3.2.1 Funding Situation - The central bank conducted a net withdrawal, and funding rates declined. From December 1st to 5th, the central bank's net withdrawal was 8480 billion yuan. R007 and DR007 decreased by 3bp compared to November 28th [28][29]. 3.2.2 Secondary Market Trends - Yields first rose and then fell this week. Except for the 1Y and 3Y Treasury bonds, the rates of other key - term Treasury bonds increased. The 10Y and 30Y Treasury bond yields rose by 1bp and 7bp respectively compared to November 28th [37]. 3.2.3 Bond Market Sentiment - The 30Y - 10Y Treasury bond term spread widened significantly, and the duration of bond funds decreased. The 30Y Treasury bond weekly turnover rate continued to rise to 35%, and the inter - bank leverage ratio rose to 107.3% [43]. 3.2.4 Bond Supply - This week, the net financing of interest - rate bonds decreased compared to last week. The net financing of Treasury bonds increased, while that of local government bonds and policy - bank bonds decreased. The net financing of inter - bank certificates of deposit turned positive, and the average issuance rate increased [57][63]. 3.3 Economic Data - Since December, movie consumption has been significantly stronger than seasonal trends, and the freight rate index has weakened. Real estate, consumption, export, and industrial production show different trends [69]. - Infrastructure and price high - frequency data show that the mill operation rate has rebounded, inventory indicators have continued to decline marginally, and most price indicators have increased [72]. 3.4 Overseas Bond Market - US consumer confidence slightly increased in December, and the expectation of the Fed's interest rate cut has risen. US bonds, Japanese and Korean bond markets declined. The 10Y - 2Y US Treasury bond spread widened, and the Sino - US 10Y Treasury bond spread widened [77][78][81]. 3.5 Major Asset Classes - The Shanghai - Shenzhen 300 index rebounded this week. Shanghai copper rose significantly, and the Nanhua live - hog index weakened. The performance of major asset classes is: Shanghai copper > rebar > Shanghai - Shenzhen 300 > Shanghai gold > CSI 1000 > Chinese - funded US dollar bonds > crude oil > Chinese bonds > convertible bonds > US dollar > live hogs [82]. 3.6 Policy Review - On December 5th, relevant policies such as the adjustment of insurance company risk factors, the management method of financial leasing company business, and articles on capital market development were released. On December 4th, an article on the construction of the monetary policy system was published. On December 1st, the list of infrastructure REITs project industries was released [86][90][91].

Report Summary 1. Core Issues Addressed - Analyze the reasons for the recent decline in the bond market - Provide an outlook for the subsequent market trends [3] 2. Core Views - Interest rate decline requires positive factors for catalysis, and the yield curve may remain steep due to supply - demand dynamics - For band trading, it is advisable to avoid 30 - year treasury bonds for now. If investing in 30 - year treasury bonds, attention should be paid to the potential increase in liquidity of Special 02 and Ordinary 02 in the future - The coupon strategy has relatively higher certainty under loose liquidity conditions [6][8][18] 3. Summary by Section 3.1 Event - In the past month, despite many positive factors in the bond market (weak fundamentals, loose funds, less supply in the fourth quarter, and the traditional year - end front - running behavior of institutions), the market has seen more declines than gains, and ultra - long bonds have performed particularly weakly. As of December 2, 25 Special 02 has reached its highest level since listing [4][13] 3.2 Comments - **Central Bank's Bond Transactions**: In November, the central bank's treasury bond transactions were only 50 billion yuan. After the news was announced, the active 30 - year treasury bond showed a repair of about 0.5 basis points, indicating that the previous pessimistic expectations had materialized. The central bank's bond transactions are mainly for government bond issuance and to maintain liquidity, with limited actual benefits to the bond market [6][14] - **Banks' Bond Sales for Profit - Taking**: This year is the second year with a significantly higher proportion of ultra - long bond supply. As of December 2, the net financing of treasury bonds this year was 4.97 trillion yuan, of which bonds with a maturity of over 10 years accounted for 30% (1.48 trillion yuan), compared with 28% in 2024 and 7% in 2023. Due to duration assessment and profit requirements, banks have a "negative feedback" effect on ultra - long bonds. Some banks, such as rural commercial banks, are unable to absorb more ultra - long bonds, and banks as a whole have the demand to sell old bonds through AC/OCI accounts to realize floating profits [6][15] - **Trading - Desk Negative Factors**: The trading volume of 10 - year treasury bonds has significantly declined, with the daily trading volume of the active 10 - year treasury bond dropping from about 60 billion yuan to about 30 billion yuan. From the CNEX divergence index on December 2, the main selling institutions are funds and securities firms. Public funds are facing the uncertainty of new redemption fee regulations, and securities firms are still short - selling 30 - year treasury bonds by borrowing them [6][8][18] - **Insurance Institutions' Investment Preference**: This year, the main investment of insurance institutions is local government bonds, which may further increase the volatility of 30 - year treasury bonds [8][18]

Report Industry Investment Rating No information provided in the content. Core Viewpoints of the Report - Market expectations for the bond market in Q1 2026 may be reflected in advance in Q4 2025. The end of 2025 may be a good time to build positions, while the bond market may not continue to adjust after the beginning of 2026 [6][9]. - There is limited trading opportunity in the bond market within the year. Products with overly long durations of trading varieties can appropriately shorten the duration, and coupon - bearing varieties such as credit bonds can be held continuously [6][12]. Summary According to Relevant Catalogs 1. Bond Market Weekly Viewpoint - Market expectations for the bond market in Q1 2026 may be reflected in advance in Q4 2025. End - of - year interest rates are difficult to decline, and the end of the year is a good time to build positions [6][9]. - From the perspective of past market expectations and institutional behavior, the current market expectation of rising interest rates in 2026 will be reflected in the end - of - year bond market. There is a possibility that inflation will rise slower than expected and the central bank will guide interest rates down in 2026. There is a limited reduction pressure in the bond market within the year [6][10][12]. 2. This Week's Focus in the Fixed - Income Market 2.1 Domestic PMI Release - China will release the manufacturing PMI for November, and the US will release data such as September PPI and September retail sales month - on - month rate. The ECB will release the minutes of its monetary policy meeting [14][15]. 2.2 Interest - Rate Bond Issuance - This week, the issuance scale of interest - rate bonds is expected to be 723.5 billion yuan, including 242 billion yuan of treasury bonds, 351.5 billion yuan of local bonds, and about 130 billion yuan of policy - bank bonds [15][16]. 3. Interest - Rate Bond Review and Outlook 3.1 Reverse Repurchase Net Injection - This week, the reverse repurchase injection continued to increase, with a total of 1.68 trillion yuan and a net injection of 554 billion yuan. After considering the maturity of treasury deposits, the net injection of open - market operations was 434 billion yuan. The capital interest rate fluctuated and then declined, and the repurchase trading volume decreased [19][20]. 3.2 Differentiated Changes in Interest Rates of Various Tenors - Last week, the bond market was weakly volatile. The yields of 10 - year treasury bonds and CDB active bonds changed by 0.8bp and - 0.1bp respectively to 1.81% and 1.87%. The yields of 1 - year, 3 - year, 5 - year, 7 - year, and 10 - year treasury bonds changed by - 1bp, - 0.5bp, 0.9bp, - 0.8bp, and 0.3bp respectively [37][40]. 4. High - Frequency Data - On the production side, most operating rates declined, and the year - on - year growth rate of the average daily crude - steel output in early November remained negative at - 11.7%. - On the demand side, the year - on - year decline in passenger - car wholesale and retail sales narrowed, and the year - on - year decline in commercial - housing transaction area slightly narrowed. The SCFI and CCFI composite indices changed by - 4% and 2.6% respectively [47][48]. - In terms of prices, crude - oil, copper, aluminum, and coking - coal prices declined. The building - materials composite price index increased, while the cement and glass indices declined. The prices of vegetables, fruits, and pork decreased [48].

Report Industry Investment Rating No information provided regarding the report industry investment rating. Core Viewpoints of the Report - After more than a month of continuous recovery, the coupon attractiveness of credit bonds has declined, and the market has shown mixed performance. Currently, the coupon strategy remains the optimal choice, but the bond - selection space has narrowed. 2 - 3Y AA(2) and above weak - quality urban investment bond sinking can still be considered, and it is not recommended to pursue ultra - long - term credit bonds for band trading. There is a small window period for band trading of Tier 2 capital bonds, and medium - to high - grade 4 - 5Y bonds with yields above 2.1% - 2.2% can be appropriately considered [1][35][37]. Summary by Relevant Catalogs Market Performance of Credit Bonds - Last week, interest - rate bonds fluctuated strongly, while credit bonds showed mixed performance for two consecutive weeks. Low - credit - grade and commercial financial bonds had relatively better market performance. Since the National Day holiday in October, credit bonds had continuously recovered for nearly a month, but starting from mid - November, the support for further decline in yields was insufficient. The yields of ultra - long - term credit bonds also showed mixed performance, with 7Y performing better than 10Y, and only the yields of ultra - long - term urban investment bonds with the weakest liquidity recovered against the trend [1][11][13]. - From November 17th to 21st, 2025, the 1Y, 2Y, 3Y, 4Y, and 5Y Treasury bond yields changed by - 1.0BP, - 0.1BP, - 0.5BP, - 0.7BP, and + 0.9BP respectively. The yields of the same - term AAA medium - term notes changed by - 0.4BP, - 0.1BP, - 2.3BP, + 0.4BP, and + 2.9BP respectively; the yields of AA + medium - term notes changed by - 0.4BP, - 0.1BP, - 1.3BP, + 1.4BP, and + 0.9BP respectively [11][12]. - The AAA/AA + 10Y medium - term note yields increased by 0.57BP, the AAA/AA + 10Y urban investment bond yields decreased by 2.16BP and 1.15BP respectively, the AAA - 10Y bank Tier 2 capital bond yields increased by 0.98BP, and the 10Y Treasury bond yields increased by 0.26BP [13]. Performance of Tier 2 Capital Bonds - Since mid - November, Tier 2 capital bonds have shown large fluctuations, with the "volatility amplifier" feature reappearing, and the decline is higher than that of the same - term general credit bonds and interest - rate bonds. The yields of 1 - 5Y, 7Y, and 10Y AAA - bank Tier 2 capital bonds increased by 0.87BP, 1.39BP, 1.36BP, 0.06BP, 1.64BP, 0.68BP, and 0.98BP respectively. Currently, the part of the curve above 4 years is still 30BP - 50BP away from the lowest yield point since 2025. Compared with the sharp decline at the end of July, only the yield points of ultra - long - term bonds above 5 years are higher than the previous round [2][17]. - Last week, the buying volume of Tier 2 capital bonds was relatively strong, but it decreased marginally compared with the previous week. From November 17th to 21st, the proportion of low - valuation transactions of Tier 2 capital bonds was 100.00%, 100.00%, 82.50%, 100.00%, and 42.50% respectively; the average transaction duration decreased compared with the previous week. The amplitude of low - valuation transactions was generally low, and the amplitude of discount transactions was also small [19][20]. Market of Ultra - Long - Term Credit Bonds - The selling pressure of ultra - long - term credit bonds has weakened for two consecutive weeks. Last week, the focus of discount transactions returned to individual bonds with credit flaws. About 57% of the discount transaction amplitudes were above 4BP, and individual bonds with credit flaws such as AVIC Industry - Finance became the trading focus again, with a trading proportion of up to 13% [3][21]. - The willingness to buy ultra - long - term credit bonds was also not strong. The market trading focus was still on weak - quality urban investment bonds. Although some institutions had a strong willingness to buy, the proportion of ultra - long - term credit bonds in transactions with an amplitude of 3BP and above was not high, and such transactions were mainly 2 - 5Y AA(2) and AA - weak - quality urban investment bonds [3][24]. Institutional Behavior - The net buying of general credit bonds by public funds has weakened, mainly for bonds within 3Y. The incremental demand brought by amortized debt funds may be weakened. Starting from late November, the opening rhythm of amortized debt funds with a closed - end period of more than 3 years will slow down. Last week, funds net - bought 138.72 billion yuan of credit bonds within 1Y, 127.47 billion yuan of 1 - 3Y credit bonds, and 73.60 billion yuan of 3 - 5Y credit bonds, with low demand for credit bonds above 7Y [3][28]. - The buying of credit bonds by wealth management products has also slowed down. Last week, wealth management products mainly net - bought 41.74 billion yuan of credit bonds within 1Y and 21.47 billion yuan of 1 - 3Y credit bonds. Since November, the weekly capital inflow scale of wealth management products has been average, and there is no significant incremental support on the demand side [28].

Group 1: Research Conclusion and Core View - The report focuses on the opportunities brought by the pricing deviation of perpetual bonds in the credit bond market. In a low - volatility environment, the year - end support for credit bonds mainly comes from the demand of allocation - type institutions, but the intensity of pre - emptive actions should not be over - expected. The report suggests three main directions for exploring urban investment bonds: (1) conduct more credit spreading within 3 years; (2) select bonds with a steep yield curve (>25bp) and certain liquidity between 3 - 5 years; (3) pay attention to the pricing deviation of perpetual and private placement bonds [5][8]. Group 2: Credit Bond Weekly Review 2.1 Negative Information Monitoring - From November 17 to November 23, 2025, the long - term issuer credit rating of Longfor Group Holdings Limited was downgraded from "BB" to "BB -" by S&P, and its senior unsecured notes' long - term rating was downgraded from "BB -" to "B+". Also, several companies had major negative events, such as Xinyuan (China) Real Estate Co., Ltd. with debt overdue and multiple major lawsuits, and Guanghui Automobile Service Co., Ltd. involved in an execution case [13][14]. 2.2 Primary Market Issuance - From November 17 to November 23, the issuance volume of credit bonds exceeded 400 billion yuan again, reaching 403.8 billion yuan, a 49% increase from the previous period. The total repayment amount increased to 262.3 billion yuan, resulting in a net financing of 141.6 billion yuan. The number of cancelled or postponed bond issuances increased to 5, with a total scale of 5.5 billion yuan. The primary issuance cost increased slightly, with the average coupon rates of AAA and AA+ bonds rising by 5bp and 7bp respectively [15][16]. 2.3 Secondary Market Trading - Last week, the valuations of credit bonds with different ratings and maturities fluctuated narrowly, with most remaining unchanged. The credit spreads narrowed at the short - end and widened at the long - end. The 3Y - 1Y term spreads of each rating narrowed, while the 5Y - 1Y term spreads widened slightly. The AA - AAA grade spread widened by 2bp for 3 - year bonds and narrowed by 3bp for 5 - year bonds. The credit spreads of urban investment bonds in each province were mostly flat or narrowed, with Yunnan having the largest narrowing of 3bp. The industry spreads of industrial bonds fluctuated within ±1bp, with the real estate industry narrowing by 3bp. The weekly turnover rate increased by 0.19pct to 1.89%. Among real - estate enterprises, the spreads of Times Holdings, Rongqiao, Yuzhou Hongtu, and Vanke widened significantly [18][20][24].

1. Report Industry Investment Rating - No industry investment rating information is provided in the report. 2. Core Viewpoints of the Report - The current strategy for credit bonds is to focus on coupon hunting, which is superior to the duration strategy. The main areas for exploration include medium - and low - quality urban investment bonds and some entities with a large convexity in the yield curve [5][8]. 3. Summary According to the Table of Contents 3.1 Credit Bond Weekly Viewpoint - The bond market was dull last week, lacking a trading theme. Credit bonds showed a hesitant performance, and the previous downward trend in yields paused. Looking ahead, positive factors for credit bonds include the concentrated opening period of amortized - cost - based open - end bond funds, stable liquidity, and the approaching time for year - end allocation to build coupon positions for the next year. Negative factors include the halt of the rapid decline in yields, a continuous drop in turnover rate, the uncertainty of the public - offering fee regulation, and potential disturbances from the stock market [5][8]. 3.2 Credit Bond Weekly Review 3.2.1 Negative Information Monitoring - There were no cases of bond defaults and overdue, no enterprises with their main ratings or outlooks downgraded, and no bonds with their debt ratings lowered from November 10 to November 16, 2025. However, several companies had significant negative events, such as Shaanxi Tourism Group Co., Ltd. receiving a warning from the inter - bank market, and many companies facing issues like debt defaults, regulatory warnings, and restrictions on high - consumption of their legal representatives [11][12]. 3.2.2 Primary Issuance - Issuance volume remained high, but the maturity volume increased significantly, leading to a reduction in net financing. From November 10 to November 16, credit bond primary issuance was 269.9 billion yuan, a 7% decrease from the previous period. The total repayment amount rose to 238.5 billion yuan, resulting in a net inflow of 31.4 billion yuan. The cost of primary issuance continued to narrow slightly, with the AA + level showing a more significant reduction. The average coupon rates for AAA and AA + were 2.10% and 2.15% respectively, with the former increasing by 1bp and the latter decreasing by 11bp [12][13]. 3.2.3 Secondary Trading - The valuations of credit bonds with various ratings and tenors fluctuated within a narrow range. Only low - grade and long - term bonds showed a slight narrowing. Credit spreads remained flat in the short term and widened passively in the medium - and long - term. The turnover rate continued to decline, dropping 0.18 percentage points to 1.69%. The spreads of most industries widened by 1bp, while the real - estate industry's spreads narrowed by 2bp. Among real - estate enterprises, the spreads of Times Holdings, Rongqiao, Vanke, and Yuzhou Hongtu widened the most [5][17][24].

Core Viewpoint - The bond market showed slight weakness on November 13, with government bond futures declining across the board, while interbank bond yields rose by approximately 0.5 basis points. The central bank's latest monetary policy report emphasizes stable growth and removes the "preventing capital outflow" statement, maintaining a favorable outlook for the bond market [1][8]. Market Performance - Government bond futures closed lower, with the 30-year main contract down 0.26% at 116.13, the 10-year main contract down 0.1% at 108.41, the 5-year main contract down 0.08% at 105.885, and the 2-year main contract down 0.01% at 102.462 [2]. - Interbank bond yields generally increased slightly, with the 30-year "25 Super Long Special Government Bond 06" yield rising by 0.5 basis points to 2.15%, and the 10-year "25 National Development Bank 15" yield up by 0.35 basis points to 1.876% [2]. International Market Trends - In North America, U.S. Treasury yields varied, with the 2-year yield up 1.67 basis points to 3.568%, and the 30-year yield down 0.29 basis points to 4.665% [3]. - In Asia, Japanese bond yields mostly rose, with the 10-year yield increasing by 1.2 basis points to 1.697% [4]. - In the Eurozone, yields on 10-year bonds generally fell, with the French yield down 4.7 basis points to 3.375% and the German yield down 1.5 basis points to 2.642% [4]. Funding Conditions - The central bank conducted a 1900 billion yuan 7-day reverse repurchase operation at a rate of 1.40%, resulting in a net injection of 972 billion yuan for the day [7]. - Short-term Shibor rates mostly declined, with the overnight rate down 10.0 basis points to 1.315% [7]. Institutional Insights - Huatai Fixed Income noted that recent regulatory measures by the central bank could help open up space for easing and improve the transmission of interest rates from short to long [8]. - CITIC Securities suggested that in the current environment of fluctuating long-term rates, investors should focus on coupon strategies and maintain a flexible approach to enhance returns [9].

Report Industry Investment Rating No relevant content provided. Core Views - In Q3 2025, the scale of bond funds and bond holdings decreased significantly, mainly due to the stock - bond seesaw and the negative impact of the new fund sales regulations. Bond funds generally reduced leverage and duration, and under - allocated interest - rate bonds, with medium - and long - term pure bond funds being the most obvious [3]. - Looking ahead, the bond market is expected to recover in Q4, and the scale of bond - type funds is likely to stabilize. With the duration of funds reaching a low point at the end of Q3, there is sufficient room for long - positions. After the possible implementation of the new fund sales regulations, the negative factors will be exhausted, which will drive the bond market, and interest rates are expected to reach a new low before the end of the year [3]. - In Q3, the overall market fund scale increased, but the bond fund scale declined. In terms of holdings, the proportion of stocks in the overall market funds increased, while that of bonds decreased, mainly by under - allocating interest - rate bonds and over - allocating credit bonds, affected by the significant interest rate adjustment in the bond market [3]. - The performance of equity assets was strong, while that of fixed - income assets was under pressure. Short - term bonds outperformed long - term bonds, and hybrid secondary bond funds outperformed hybrid primary bond funds. The equity market rally in Q3 drove up the yields of equity - related assets, and the bond yield curve steepened bearishly, with medium - and long - term bonds performing weaker [3]. Summary by Directory 1. Fund Total Scale Rises, Bond Allocation Scale Drops 1.1 Fund Market Scale: Both Fund Shares and Net Asset Value Increase - As of the end of Q3 2025, there were about 13,300 funds, with a market share of approximately 31.06 trillion shares and a net asset value of about 35.92 trillion yuan. Compared with the end of Q2 2025, the number of funds increased by 3.06%, the market share by 0.53%, and the net asset value by 6.52% [7]. 1.2 Fund Asset Allocation: Bond Allocation Proportion Drops Significantly - By the end of Q3 2025, the total fund asset value increased by 3.95% compared with Q2. The market value of stock holdings increased by 24.81% quarter - on - quarter, that of bond holdings decreased by 5.02%, and that of cash holdings increased by 5.86% [15]. - The proportion of stock assets in fund holdings increased, while that of bonds decreased. At the end of Q3 2025, the proportions of stocks, bonds, cash, and other assets were 23.58%, 52.81%, 13.11%, and 9.85% respectively, with the bond asset proportion decreasing by 4.98 pct quarter - on - quarter [15]. 1.3 Fund Bond - Holding Analysis: Interest - Rate Bond Allocation Proportion Drops Significantly - By the end of Q3 2025, among all funds' bond holdings, interest - rate bonds, financial bonds, credit bonds, inter - bank certificates of deposit, and other bonds decreased by 8.76%, 3.68%, 0.85%, 4.65%, and 6.29% respectively quarter - on - quarter [17]. - The proportion of interest - rate bonds in fund bond holdings decreased the most. At the end of Q3 2025, the proportions of financial bonds, credit bonds, and inter - bank certificates of deposit in bond holdings increased by 0.18 pct, 0.88 pct, and 0.13 pct respectively, while those of interest - rate bonds and other bonds decreased by 1.16 pct and 0.04 pct respectively [19]. 2. Hybrid Bond Fund Stock - Holding Analysis - The market values of stocks held by hybrid secondary bond funds and hybrid primary bond funds were 201.1 billion yuan and 6.3 billion yuan respectively, with quarter - on - quarter increases of 91.7 billion yuan and 866 million yuan, and growth rates of 84% and 16% respectively [22]. - In terms of the top five industries by market value in the heavy - holding stocks of hybrid secondary bond funds, they were electronics, non - ferrous metals, power equipment, pharmaceutical biology, and media. In terms of quarter - on - quarter changes, electronics, non - ferrous metals, power equipment, media, and pharmaceutical biology were the most over - allocated, while public utilities, banks, building decoration, steel, and beauty care were the most under - allocated [22]. 3. Bond Fund Bond - Holding Analysis 3.1 All Bond Funds: Total Bond - Holding Scale Drops, Interest - Rate Bond Allocation Proportion Decreases - By the end of Q3 2025, the total value of bonds held by bond - type funds was about 11.61 trillion yuan, a decrease of 910.1 billion yuan or 7.27% compared with Q2 2025. The market values of interest - rate bonds, financial bonds, credit bonds, inter - bank certificates of deposit, and other bonds decreased by 612.3 billion yuan, 143.4 billion yuan, 39 billion yuan, 73.8 billion yuan, and 41.6 billion yuan respectively [23]. - The proportions of interest - rate bonds, inter - bank certificates of deposit, and other bonds decreased. The proportions of interest - rate bonds, financial bonds, credit bonds, inter - bank certificates of deposit, and other bonds in bond investment market value were 42.15%, 20.59%, 30.55%, 2.35%, and 4.36% respectively, with quarter - on - quarter changes of - 1.83 pct, 0.35 pct, 1.91 pct, - 0.42 pct, and - 0.02 pct respectively [23]. - The proportions of treasury bonds and policy - bank bonds in all bond funds decreased, while those of enterprise bonds, short - term financing bills, and medium - term notes increased [27]. 3.2 Medium - and Long - Term Pure Bond Funds: Treasury Bond Allocation Proportion Drops - By the end of Q3 2025, the total value of bonds held by medium - and long - term pure bond funds was about 6.88 trillion yuan, a decrease of 11.41% compared with Q2 2025. Interest - rate bonds, financial bonds, credit bonds, inter - bank certificates of deposit, and other bonds decreased by 12.76%, 11.94%, 4.24%, 24.26%, and 31.84% respectively [29]. - The proportion of interest - rate bonds decreased. The proportions of interest - rate bonds, financial bonds, credit bonds, inter - bank certificates of deposit, and other bonds in bond investment market value were 48.62%, 22.20%, 25.15%, 1.64%, and 2.4% respectively, with quarter - on - quarter changes of - 0.75 pct, - 0.13 pct, 1.88 pct, - 0.28 pct, and - 0.72 pct respectively [29]. - The proportion of treasury bonds decreased, while that of policy - bank bonds increased. The proportions of enterprise bonds, short - term financing bills, and medium - term notes increased [32]. 3.3 Short - Term Pure Bond Funds: Financial Bond Allocation Proportion Drops - By the end of Q3 2025, the total value of bonds held by short - term pure bond funds was about 1.003 billion yuan, a decrease of 21.68% compared with Q2 2025. Interest - rate bonds, financial bonds, credit bonds, inter - bank certificates of deposit, and other bonds decreased by 10.50%, 30.67%, 20.47%, 37.44%, and 28.41% respectively [36]. - The proportion of financial bonds decreased. The proportions of interest - rate bonds, financial bonds, credit bonds, inter - bank certificates of deposit, and other bonds in bond investment market value were 15.67%, 16.92%, 64.01%, 2.66%, and 0.74% respectively, with quarter - on - quarter changes of 1.96 pct, - 2.19 pct, 0.98 pct, - 0.67 pct, and - 0.07 pct respectively [37]. - The proportion of treasury bonds decreased, while that of policy - bank bonds increased. The proportions of enterprise bonds and short - term financing bills increased [39]. 4. Fund Heavy - Holding Bond Structure Analysis: Treasury Bond Holding Proportion Rises Continuously - In Q3 2025, the structure of interest - rate bonds in the heavy - holding bonds of bond - type funds remained basically unchanged. The proportions of treasury bonds, local government bonds, and policy - bank bonds were 11.63%, 1.32%, and 87.05% respectively, with changes of 0.01 pct, - 0.02 pct, and 0.01 pct compared with Q2 2025 [42]. - Bond - type funds increased the allocation ratio of industrial bonds with AA and below ratings and decreased the allocation ratios of industrial bonds with AAA and AA + ratings. The proportions of AAA, AA +, AA, and below AA industrial bonds were 94.71%, 4.40%, 0.75%, and 0.15% respectively [43]. - Bond - type funds increased the allocation ratio of AA + rated urban investment bonds and decreased the allocation ratios of AAA and AA and below rated urban investment bonds. The proportions of AAA, AA +, AA, and below AA urban investment bonds were 60.59%, 31.98%, 7.10%, and 0.32% respectively [44]. - In terms of regions, bond - type funds still mainly held urban investment bonds from Zhejiang, Jiangsu, and Shandong at the end of Q3 2025. The holding proportions in Jiangsu, Chongqing and other regions increased quarter - on - quarter, while those in Shandong, Guangdong and other regions decreased [45][46]. 5. Fund Leverage and Duration Analysis: Both Leverage Ratio and Duration Decrease - In Q3, the leverage ratios of medium - and long - term pure bond funds, primary bond funds, and secondary bond funds decreased. The leverage ratios of medium - and long - term pure bond funds, primary bond funds, and secondary bond funds were 117.38%, 112.64%, and 110.82% respectively, with decreases of 2.82 pct, 3.97 pct, and 3.02 pct compared with Q2 2025 [48]. - In Q3, the durations of medium - and long - term pure bond funds, primary bond funds, and secondary bond funds decreased. The durations of medium - and long - term pure bond funds, primary bond funds, and secondary bond funds were 2.96 years, 2.8 years, and 2.92 years respectively, with decreases of 0.8 years, 1.27 years, and 0.9 years compared with Q2 2025 [48]. 6. Fund Performance Analysis: Performance of Products with Equity Exposure Increases Significantly - In Q3 2025, the median quarterly returns of various funds were ranked as follows: stock - type funds (20.67%) > hybrid funds (19.51%) > secondary bond funds (2.6%) > money market funds (0.29%) > short - term pure bond funds (0.23%) > primary bond funds (0.19%) > medium - and long - term pure bonds (- 0.29%) > ChinaBond CDB Bond Total Full Price Index (- 1.18%) > ChinaBond Treasury Bond Total Full Price Index (- 1.84%) [50].