Core Viewpoint - The A-share market experienced a "red-hot index with hidden currents" scenario, where all three major indices rose, but trading volume decreased significantly, indicating a typical signal of market consolidation and potential risks ahead [1][3]. Group 1: Market Performance - On Monday, the Shanghai Composite Index closed at 3863 points, showing a superficial increase of 0.63%, but trading volume fell below 2 trillion yuan for two consecutive days [3]. - Over 4,000 stocks rose, yet the total trading volume shrank to 1.75 trillion yuan, a decrease of 200 billion yuan from the previous day [1]. Group 2: Capital Movement - Main funds quietly withdrew during the rise of technology stocks, highlighting a divergence in market sentiment [3]. - The shift in capital from high-valued technology stocks to undervalued blue-chip stocks indicates a strategy to mitigate risks associated with high valuations in the tech sector [4]. Group 3: Historical Context and Logic - Historical patterns suggest that in a bull market, consolidation often occurs through sector rotation, where main funds attract follow-up buying in tech stocks while selling off shares to invest in lagging sectors [6]. - The current market dynamics align with this historical behavior, characterized by a slight index increase and stock differentiation [6]. Group 4: Retail Investor Sentiment - The broad market increase prompted some investors to seek quick profits, but if the market opens lower and then rises on Tuesday, it could trigger a cycle of short covering, leading to a "sell low, buy high" scenario [7]. - The A-share market is fundamentally a game of human psychology, with main funds exploiting retail investors' short-term anxieties [7].

Core Insights - Since the launch of the "9·24" market rally in 2024, bank stocks have been one of the best-performing sectors in the A-share market, with the China Securities Bank Index showing a cumulative increase of approximately 24% over the past year [1] - The market capitalization of the banking sector has surpassed 10 trillion yuan for the first time, with Agricultural Bank of China briefly overtaking Industrial and Commercial Bank of China in market value before the latter regained its position [1][3] - Since July, bank stocks have entered a phase of volatility and correction, with the index declining nearly 13% from its peak, while the Shanghai Composite Index rose over 10% during the same period [1] Market Performance - All 42 A-share listed banks have seen positive stock price movements over the past year, with the highest increase nearing 59% and the lowest around 8% [2] - Specifically, 36 banks have increased by over 20%, 23 by over 30%, and 5 by over 40% [2] - The top three performers include Qingdao Bank (58.87%), Xiamen Bank (50%), and Agricultural Bank of China (48.6%) [2] Market Capitalization - As of September 24, the total A-share market capitalization of the 42 listed banks is approximately 10.6 trillion yuan, an increase of 2.37 trillion yuan from 8.23 trillion yuan a year ago [3] - The total market capitalization, including H-shares, is about 13.9 trillion yuan, up by over 3 trillion yuan from 10.83 trillion yuan a year ago [3] - The top five banks by A-share market capitalization are Agricultural Bank of China (2.1 trillion yuan), Industrial and Commercial Bank of China (2.01 trillion yuan), and China Bank (1.26 trillion yuan) [3] Value Growth - The largest increases in A-share market capitalization have been seen in Agricultural Bank of China and Industrial and Commercial Bank of China, with increases of approximately 565.1 billion yuan and 396.3 billion yuan, respectively [3][4] - Eight banks have seen their A-share market capitalization increase by over 100 billion yuan since last September, with the top four being state-owned banks [3] Recent Trends - Since July, bank stocks have experienced a correction, with over half of the banks seeing declines of more than 10% [5] - Notably, only two banks, Agricultural Bank of China and Postal Savings Bank of China, have remained in the green during this period [5] - The median dividend yield for bank stocks is currently around 4.5%, which has decreased by over 1 percentage point from a year ago but still offers a significant advantage over other asset yields [5]

Group 1 - In August, government bond futures prices experienced a general decline, with the T2512 contract price dropping by 0.58%, leading to a rise in the 10-year government bond yield to 1.84%, an increase of 14 basis points from the end of July, marking the highest level since March of this year [1] - Domestic industrial production maintained rapid growth in July, with government bond financing remaining high, contributing to a rebound in social financing growth rate to 9%. Both M1 and M2 growth rates also increased, indicating a significant improvement in fund activation and market expectations for economic growth [1][3] - The Shanghai Composite Index reached a 10-year high in mid-August, reflecting a "see-saw effect" between bond and equity markets, as funds flowed from bonds and deposits into higher-yielding non-bank sectors, suppressing bond market sentiment and enhancing market risk appetite [1] Group 2 - In August, the People's Bank of China (PBOC) conducted a total of 600 billion yuan in medium-term lending facility (MLF) operations, with a net injection of 300 billion yuan, marking the sixth consecutive month of increased operations. Additionally, the PBOC intensified open market operations, resulting in a net injection of 11,464 billion yuan through reverse repos [4] - The PBOC's second-quarter monetary policy report emphasized the need for a moderately accommodative monetary policy, ensuring ample liquidity in the banking system [4][5] - As of the end of August, the total scale of China's bond market exceeded 191.71 trillion yuan, with a net financing amount of 17,571 billion yuan in August, remaining at a high level despite a slight decrease compared to previous months [7]

Market Overview - The market exhibited a "seesaw" effect with high dividend assets performing actively while technology stocks experienced a pullback, leading to declines in companies within the computing power industry [1] - The Shanghai Composite Index fell by 0.79%, the Shenzhen Component Index dropped by 2.21%, and the ChiNext Index decreased by 2.9% [1] Banking Sector - The banking sector rebounded with notable gains in stocks such as Chongqing Rural Commercial Bank and Shanghai Rural Commercial Bank [2] - The overall performance of the banking sector's mid-year reports showed improvement, with most banks experiencing a rebound in revenue and profit growth, a stable or declining non-performing loan ratio, and a steady provision coverage ratio [4][5] - Analysts suggest that the banking sector is likely to see a rotation and rebound due to solid fundamentals and previous adjustments, with a focus on regional banks and high-dividend stocks [5] Electricity Sector - The electricity sector showed active performance with significant gains in stocks like Jingyuntong and Huaguang New Energy [6] - In July, the total electricity consumption reached 10,226 billion kWh, marking an 8.6% year-on-year increase, with strong demand for electricity [9] - Analysts recommend focusing on leading companies in renewable energy, regional offshore wind power enterprises, and companies involved in the integration of renewable energy and computing power [9]

Group 1 - The bond market is expected to experience weak fluctuations in the short term due to high market risk appetite and the influence of stock market performance on bond market dynamics [1][4] - Recent policies focus on "anti-involution," promoting consumption, and stabilizing expectations, leading to a strong stock market while the bond market remains weak [1][3] - The "seesaw" effect between stocks and bonds is evident, where optimistic economic expectations lead to increased stock allocation and reduced bond allocation, and vice versa [1][2] Group 2 - Historical data shows that there have been four notable "dual bull" markets in stocks and bonds since 2016, typically lasting less than one month and occurring when economic fundamentals remain stable [2] - The current strong stock market is driven by global liquidity easing and a stable domestic economic and policy environment, attracting steady capital inflow [3][4] - The bond market has shown relative resilience due to stable institutional liabilities and controlled redemption pressures, with a strong demand for government bonds despite rising yields [4]

Market Performance - A-shares led global equity markets with the Shanghai Composite Index rising by 3.49% and the ChiNext Index increasing by 5.85%[4] - The implied volatility of the 50ETF rose to 19.78%, indicating increased market uncertainty[4] - The Dow Jones reached a new high with a gain of 1.53%, while the Nasdaq experienced a slight decline of 0.58%[4] Bond Market Insights - The 30-year government bond futures fell by 1.43%, reflecting significant adjustments in the domestic bond market[4] - The negative correlation between stocks and bonds reached a historical high, highlighting the "see-saw effect" in market dynamics[4] Commodity Trends - International commodities showed strength, with Brent crude oil up by 2.14% and COMEX gold rising by 1.02%, driven by geopolitical risks and inflation hedging[4] - Domestic commodity prices generally declined, with the South China Commodity Index down by 0.44%[4] Currency Movements - The US dollar index decreased by 0.13%, while the offshore RMB appreciated by 0.24%[4] Asset Allocation Recommendations - For bonds, focus on high-grade credit bonds and adjust duration flexibly in a low-risk environment[5] - In overseas equities, consider opportunities in interest-sensitive sectors due to limited short-term rebound potential for the dollar[5] - For A-shares, maintain an overweight position in technology growth sectors, particularly electronics and AI hardware[5] Risk Factors - Key risks include policy adjustments, market volatility, geopolitical shocks, economic data validation risks, and liquidity transmission risks[6]

Core Insights - The phenomenon of "deposit migration" in China's financial market reflects a significant shift of residents' funds from traditional bank deposits to non-bank financial institutions, driven by low deposit interest rates and attractive stock market performance [1][2][5] Group 1: Deposit Migration Dynamics - In July 2025, residents' deposits decreased by 1.11 trillion yuan, a year-on-year drop of 780 billion yuan, while non-bank financial institutions saw an increase of 1.39 trillion yuan, marking a near ten-year high [1] - The decline in bank deposit attractiveness is attributed to a continuous drop in interest rates, with many small and medium banks reducing rates by 10 to 40 basis points since April, leading to annualized rates below 2% [1][2] - The stock market's strong performance in July, with over 2 million new stock accounts opened, indicates a growing participation of ordinary citizens in equity investments [2][3] Group 2: Changing Investment Landscape - The diversification and convenience of investment channels have contributed to this trend, with mobile technology enabling easy access to various investment products [2][3] - A shift in the public's financial mindset is evident, as individuals now recognize that idle funds equate to depreciation due to inflation and rising living costs [2][5] - The younger generation, particularly those born after 2000, shows a higher acceptance of investment, actively engaging in the stock market and driving new investment trends [3][5] Group 3: Policy and Economic Implications - Recent monetary policy changes, including a reduction in loan market quotation rates and deposit rates by major banks, have further encouraged the flow of funds into alternative investment channels [3][5] - The "deposit migration" phenomenon is seen as a "seesaw effect" between resident deposits and non-bank deposits, where declining bank deposit yields push funds towards higher-yielding investments [5] - This shift is expected to enhance liquidity in the stock market, expand asset management for fund companies, and increase premium income for insurance firms, indicating a transformative impact on the financial ecosystem [5][7] Group 4: Future Outlook - The trend of "deposit migration" is likely to persist in the short term due to ongoing low bank deposit rates and deepening capital market reforms [7] - As the financial market matures, wealth management for residents is anticipated to become more diversified and professional, with bank deposits remaining a key option for risk-averse investors [7][9] - The overall societal impact of this shift is positive, promoting market activity, improving resource allocation efficiency, and creating more wealth opportunities for the public [9]

Market Overview - The A-share market has shown strong upward momentum, with the Shanghai Composite Index breaking through the key level of 3674.40 points, reaching a new high since the "9·24" rally last year, with a year-to-date increase of nearly 10% [1] - On August 14, the index continued to rise, surpassing 3700 points, marking the highest level since December 2021, with trading volume in the Shanghai and Shenzhen markets reaching 2.18 trillion yuan, indicating a significant increase in market activity [1][2] Equity Market Dynamics - The current rally in the equity market is driven by multiple factors, including improved expectations from "anti-involution" policies, increased participation from retail investors, institutional funds, and foreign capital, as well as resilient macroeconomic fundamentals and proactive fiscal policies [2] - Various sectors are experiencing structural opportunities, with significant gains in securities, semiconductors, and insurance, indicating a shift away from a market dominated solely by bank stocks [2] Bond Market Analysis - The bond market has shown a mixed performance, with the yield on 10-year government bonds rising from 1.6855% on August 11 to 1.7350% on August 13, reflecting a lack of clear catalysts for bond price increases [1][2] - The bond market is currently influenced by two main factors: the strong performance of the equity market reducing the willingness of bond investors to increase positions, and a divergence in institutional behavior, with funds and brokerages being net sellers while banks and insurance companies are net buyers [3][5] Tax Policy Impact - The recent restoration of value-added tax on interest income from newly issued government and local bonds has led to an increase in selling pressure from funds, impacting their future bond allocation strategies [5][6] - Despite the tax changes, the overall impact on the bond market is expected to be limited, as the demand for fixed-income products remains relatively stable [8] Future Outlook - The bond market is perceived to be in a "top and bottom" range, with limited potential for significant yield declines due to the strong equity market and investor risk appetite, while still supported by a loose monetary policy [7] - Analysts suggest that the "look at stocks, do bonds" strategy may continue, but the coexistence of a "dual bull" market for stocks and bonds is also possible as the capital market recovers [7][8]

Report Industry Investment Rating No relevant content provided. Core Viewpoints of the Report - The further decline of US Treasury yields before September may be primarily driven by weaker economic data leading to higher expectations of interest rate cuts, or by the "see - saw effect" triggered by the weakness of other assets. The 10 - year yield is expected to fluctuate at a low level in the range of 4.00 - 4.30%, but inflation and the "Big and Beautiful" Act may impede the decline of long - term yields [4][14]. - In the two - week period from July 18 to August 1, 2025, affected by the US July non - farm payroll report, global investors' risk - aversion increased, resulting in a double - kill situation in the US stock and bond markets. Different asset classes showed various trends, including significant declines in US and UK government bond yields, a new high in the Japanese stock market, a slump in the US stock market, an upward trend in the coking coal index, a decline in Chicago agricultural product futures prices, and a depreciation of the ruble and the euro [5][15]. Summary According to the Directory 1. What Conditions are Needed for the Further Decline of US Treasury Yields? - **Monetary Policy**: At the July FOMC meeting, the interest rate and other monetary policies remained at the June level, in line with market expectations. Waller and Bowman voted against interest rate cuts, citing signs of weakness in the labor market, and Kugler, who was set to leave early, did not attend or vote. Kugler's early departure may increase Trump's influence on the Fed and lead to more divided views within the Fed [1][10]. - **Growth**: Q2 GDP showed a quarter - on - quarter increase of 3.0%, but the main drivers were a decline in imports and accelerated consumer spending. Private consumption and investment weakened, with PDFP growing by 1.2% quarter - on - quarter, lower than the 1.9% in Q1 [2][10]. - **Inflation**: In June, inflationary pressures emerged, with CPI at 2.7%, core CPI at 2.9%, PCE at 2.6%, and core PCE at 2.8%, all reaching the highest levels since March [2][10]. - **Employment**: In July, the ADP employment figure rebounded unexpectedly, but the non - farm payroll data was disappointing, with significant downward revisions to previous months' data. The unemployment rate rose from 4.1% to 4.2%, which greatly disrupted the interest rate market expectations, causing the 1 - year yield to decline by about 17bp on August 1 [2][11]. - **Policy Stance**: Some Fed presidents still recognize the resilience of the economy and employment and maintain a restrictive monetary policy stance, denying the risk of recession and affirming the risk of stagflation [3][12]. 2. Bi - weekly Overseas Macro - analysis - **Interest Rates**: In the past two weeks, US Treasury yields declined significantly, with the 1 - year and 10 - year yields both dropping 21bp to 3.87% and 4.23% respectively. Affected by US Treasuries, UK government bond yields also declined on August 1, increasing investors' risk - aversion [5][16]. - **Equities**: The Japanese stock market reached a new high, with the Nikkei 225 index rising 2.46% in the past two weeks, driven by the US - Japan trade agreement on July 23. However, trading volume was low in July. The US stock market slumped after the release of the July non - farm payroll report, with the Nasdaq index dropping 2.29% on the night of the report release [17]. - **Commodities**: The coking coal index rose 12.07% in the past two weeks after the central government emphasized governance of low - price and disorderly competition in the coal industry. Chicago agricultural product futures prices fell across the board, pressured by high expectations of a bumper US autumn harvest [18]. - **Foreign Exchange**: The ruble depreciated by 3.44% in the past two weeks after the Russian central bank cut interest rates by 200 basis points on July 25. The euro fell 1.24% due to the impact of the US - EU trade agreement and a decline in investor confidence [19]. 3. Market Tracking - The report presents multiple charts, including the bi - weekly fluctuations of global major economies' government bond yields, global major stock indices, major commodities, and global major foreign exchange rates (against the RMB), as well as the latest economic data panels of the US, Japan, and the Eurozone, and the yield curves and inflation trends of US, Japanese, and German government bonds [24][28][30][32][35][41][45].

Group 1: Investment Rating - There is no information about the industry investment rating provided in the report. Group 2: Core Views - Last week, the bond market adjusted continuously. Credit bonds experienced an unexpected "steep decline" with larger drops than interest - rate bonds. Affected by the "anti - involution" sentiment, the equity and commodity markets strengthened, causing the bond market to weaken due to the "see - saw" effect. Tightening liquidity in the second half of the week and strong profit - taking in funds and wealth management also contributed to the decline. The central bank's liquidity support on Friday stabilized the bond market temporarily [2][11]. - The adjustment of ultra - long - term credit bonds exceeded that of interest - rate bonds of the same maturity, with the highest adjustment in perpetual and secondary capital (perpetual and Tier 2, "Perp & T2") ultra - long bonds. The yields of AAA/AA + 10Y medium - term notes, AAA/AA + 10Y urban investment bonds, and AAA - 10Y bank Tier 2 capital bonds all increased significantly [3][12]. - The Perp & T2 bond market weakened and showed a "volatility amplifier" characteristic, with the declines of 3Y and above maturities exceeding those of general credit and ultra - long - term credit bonds of the same maturities. The trading sentiment was weak throughout the week, only easing on Friday [4][17]. - The selling intention of ultra - long - term credit bonds was strong, while the buying intention was weak. High - activity trading was mainly concentrated in 3 - 5Y low - quality urban investment bonds and some short - term real estate and financial bonds with flaws [5][22]. - Public funds continued to reduce their credit bond holdings, especially for bonds with maturities over 5 years. However, the turnover rate of 3 - 5Y Perp & T2 bonds increased significantly, indicating a shift to more liquid varieties. The trading value of credit - market - making ETFs decreased by nearly 4 billion, and the growth rate of the trading value of sci - tech innovation bond ETFs slowed down [5][27]. - In the short term, liquidity is still the key strategy. After the steep decline, 3 - 5Y bank Tier 2 capital bonds present certain investment opportunities, and there are also good opportunities for 1 - 3Y low - quality urban investment bond sinking and riding strategies. It is recommended to wait for better entry points for ultra - long - term bonds [5][27]. Group 3: Summary by Directory 1. Bond Market Adjustment and Performance - From July 21 to July 25, 2025, the yields of 1Y - 5Y treasury bonds increased by 3.5BP, 5.5BP, 7.3BP, 7.9BP, and 7.9BP respectively, while the yields of the same - maturity AAA and AA + medium - term notes increased more significantly [11]. - The yields of 10Y AAA/AA + medium - term notes, AAA/AA + urban investment bonds, and AAA - 10Y bank Tier 2 capital bonds increased by 11.99BP, 9.99BP, 11.14BP, 10.14BP, and 14.47BP respectively, while the 10Y treasury bond yield only increased by 6.72BP [3][12]. 2. Curve Shape and Credit Spread Analysis - The steepness of the 1 - 2Y all - grade and 2 - 3Y low - grade curves was the highest, and the steepness was basically the same as that at the end of May. Except for the relatively flat short - end (less than 1 year), the rest of the maturities were at the highest steepness since the current bull market [14]. - The 3Y - 5Y credit spread protection cushion has been strengthened. The yields of 1Y - AAA, 3Y - AAA, 5Y - AAA, 1Y - AA +, 3Y - AA +, 5Y - AA +, 1Y - AA, and 3Y - AA medium - term notes were at the 19.89%, 26.02%, 25.25%, 12.75%, 15.05%, 18.62%, 13.77%, and 17.85% levels since 2024 respectively. The historical quantiles of their credit spreads were 11.14%, 24.66%, 28.64%, 6.89%, 13.52%, 21.48%, 7.69%, and 26.79% respectively [16]. 3. Perp & T2 Bond Market Analysis - The Perp & T2 bond market weakened, and the declines of 3Y and above maturities exceeded those of general credit and ultra - long - term credit bonds of the same maturities. The 1 - 5Y, 7Y, and 10Y AAA - bank Tier 2 capital bond yields increased by 6.73BP, 11.11BP, 13.80BP, 15.27BP, 13.67BP, 14.21BP, and 14.47BP respectively [4][17]. - The trading sentiment was weak throughout the week, only easing on Friday. From July 21 to July 25, the low - valuation trading ratios of Perp & T2 bonds were 4.88%, 7.32%, 0.00%, 0.00%, and 100.00% respectively, and the average trading durations were 0.77 years, 0.63 years, 0.53 years, 0.50 years, and 4.05 years respectively [4][19]. 4. Ultra - long - term Credit Bond Market Analysis - The selling intention of ultra - long - term credit bonds was strong, and the discount trading ratios from July 21 to July 25 were 92.68%, 60.98%, 90.24%, 97.56%, and 65.85% respectively. The discount amplitude was also significant, with some trading at over 5BP [5][22]. - The buying intention of ultra - long - term credit bonds was weak. The low - valuation trading ratios from July 21 to July 25 were 29.27%, 4.88%, 2.44%, 2.44%, and 4.88% respectively, and most of the low - valuation trading amplitudes were within 2BP [5][23]. 5. Institutional Behavior and ETF Analysis - Public funds continued to reduce their credit bond holdings, especially for bonds with maturities over 5 years. However, the turnover rate of 3 - 5Y Perp & T2 bonds increased significantly, indicating a shift to more liquid varieties [5][27]. - Affected by the market adjustment, the trading value of credit - market - making ETFs decreased by nearly 4 billion in a week, and the growth rate of the trading value of sci - tech innovation bond ETFs slowed down, with the subsequent increase in ETFs possibly falling short of expectations [5][27].