1. Report Industry Investment Rating There is no information provided regarding the industry investment rating in the report. 2. Core Viewpoints of the Report - After the double - rate cut, the short - end of the bond market declined by 5bp. The mid - short end of the bond market showed a significant decline, with the 1Y Treasury bond yield dropping to 1.40%. The long - end was volatile, and the yield curve steepened slightly. The focus in the future may be on the buying power of large banks and the amount of funds lent out [2][11]. - Small and medium - sized banks + foreign capital, money market funds, and mutual funds were the main driving forces for the decline in the yields of Treasury bonds, China Development Bank bonds, credit bonds, and certificates of deposit this week [3][11]. - The bond market leverage ratio continued to fluctuate at a low level, rising to 106.70% overall. However, mutual funds increased leverage, and the long - and medium - term bond fund duration decreased overall. Currently, non - bank institutions may prefer leverage strategies and maintain a neutral attitude towards duration [3][12]. 3. Summary by Relevant Catalogs 3.1 This Week's Institutional Behavior Review - In terms of interest - rate bonds, rural commercial banks and foreign capital were the main driving forces for short - term Treasury bonds, with a net purchase of over 10 billion yuan of Treasury bonds under 1Y this week. Rural commercial banks adopted a barbell - shaped allocation. Money market funds were the main force for increasing the allocation of policy - financial bonds, and insurance institutions continued to increase their allocation of local bonds in the secondary market [2][11]. - In terms of credit bonds and certificates of deposit, non - bank institutions bought a large number of certificates of deposit in the secondary market, with 8 out of 12 types of institutions having net purchases. Mutual funds increased their allocation of 1 - 3Y medium - term notes and increased their buying of Tier 2 capital bonds, with the buying volume of other types of bonds approaching 50 billion yuan this week [3][11]. 3.2 Bond Market Yield Curve and Term Spread 3.2.1 Yield Curve - Treasury bond yields generally declined. The 1Y yield decreased by 4bp, the 3Y by 1bp, the 5Y by 2bp, the 7Y by 1bp, while the 10Y, 15Y, and 30Y yields increased by 1bp, 1bp, and 2bp respectively. In terms of quantiles, the 1Y dropped to the 10% quantile, the 3Y remained at the 6% quantile, etc. [13]. - China Development Bank bond yields also generally declined. The 1Y yield decreased by 9bp, the 3Y by 5bp, the 5Y by 2bp, the 7Y by 3bp, while the 10Y, 15Y, and 30Y yields increased by 1bp, 1bp, and 2bp respectively. In terms of quantiles, the 1Y dropped to the 5% quantile, the 3Y to the 3% quantile, etc. [13]. 3.2.2 Term Spread - For Treasury bonds, the interest - rate spread showed a differentiated trend, and the term spread widened overall. The 1Y - DR001 spread inverted more deeply by 3bp, while the 1Y - DR007 spread inverted less deeply by 13bp. Other term spreads also had different changes in widening or narrowing [15]. - For China Development Bank bonds, the interest - rate spread inversion eased, and the term spread widened overall. The 1Y - DR001 spread inverted less deeply by 20bp, and the 1Y - DR007 spread inverted less deeply by 17bp. Other term spreads also had corresponding changes [16]. 3.3 Bond Market Leverage and Funding Situation 3.3.1 Leverage Ratio - From May 6th to May 9th, 2025, the leverage ratio first increased and then decreased during the week. As of May 9th, the leverage ratio was about 106.70%, up 0.03pct from last Friday and down 0.13pct from Monday [19]. 3.3.2 Average Daily Turnover of Pledged Repurchase - The average daily turnover of pledged repurchase increased compared with last week. From May 6th to May 9th, the average daily turnover of pledged repurchase was about 6.8 trillion yuan, an increase of 2.1 trillion yuan compared with last week. The average overnight proportion was 85.79% [26][27]. 3.3.3 Funding Situation - From May 6th to May 9th, the lending of bank - based funds continued to increase. The net lending of large banks and policy banks on May 9th was 3.26 trillion yuan, and the average daily net lending of joint - stock banks and rural commercial banks was 0.02 trillion yuan, with a net lending of 0.09 trillion yuan on May 9th. The main fund borrowers were mutual funds, and the lending of money market funds continued to decline [31]. - DR007 and R007 continued to decline. As of May 9th, R007 was 1.58%, down 0.26pct from last Friday; DR007 was 1.54%, down 0.26pct from last Friday; the spread between R007 and DR007 was 3.96bp. 1YFR007 and 5YFR007 also continued to decline [31][32]. 3.4 Duration of Long - and Medium - Term Bond Funds - The median duration of long - and medium - term bond funds decreased to 2.74 years (de - leveraged) and 2.99 years (leveraged). On May 9th, the median duration (de - leveraged) was 2.74 years, down 0.06 years from last Friday; the median duration (leveraged) was 2.99 years, down 0.1 years from last Friday [41][43]. - In terms of different types of bond funds, the median duration of interest - rate bond funds (leveraged) increased to 3.78 years, up 0.03 years from last Friday; the median duration of credit bond funds (leveraged) decreased to 2.67 years, down 0.12 years from last Friday. The median duration of interest - rate bond funds (de - leveraged) was 3.36 years, down 0.01 years from last Friday; the median duration of credit bond funds (de - leveraged) was 2.57 years, down 0.05 years from last Friday [48]. 3.5 Comparison of Category Strategies - Sino - US yield spread: The overall inversion deepened. The 1Y spread inverted more deeply by 24bp, the 2Y by 30bp, the 3Y by 28bp, the 5Y by 30bp, the 7Y by 26bp, the 10Y by 19bp, and the 30Y by 15bp [52]. - Implied tax rate: It narrowed overall. As of May 9th, the spread between China Development Bank bonds and Treasury bonds narrowed by 5bp for 1Y, 4bp for 3Y, less than 1bp for 5Y, 2bp for 7Y, and 1bp for 10Y [53]. 3.6 Changes in Bond Lending Balance - On May 9th, the concentration trend of lending of active 10Y Treasury bonds increased, while the concentration trends of lending of less - active 10Y Treasury bonds, active 10Y China Development Bank bonds, less - active 10Y China Development Bank bonds, and active 30Y Treasury bonds decreased [54].

Report Summary 1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Core Viewpoints - In March, the total bond custody scale increased by 265.56 billion yuan month - on - month, with the increment mainly contributed by inter - bank certificates of deposit (CDs), which reached a record high of 1.12 trillion yuan. However, the custody increments of various interest - rate bonds and credit bonds decreased slightly compared to the previous month [4][7]. - After a mid - to - early - month correction, the bond market recovered in late March. Due to looser funds, the demand for CDs from broad - based funds soared, leading to a significant increase in net financing of CDs despite a high maturity volume, and CD rates peaked and declined. The increased purchases of interest - rate bonds by trading institutions such as broad - based funds and securities firms, along with a marginal decrease in government bond supply, alleviated the pressure on commercial banks' asset - side to undertake primary issuance, and thus eased their liability pressure. However, the demand for credit bonds from trading desks remained weak, the bond purchases by insurance companies slightly decreased, and overseas institutions also significantly increased their CD holdings, with the overall bond purchase volume reaching a new high since August last year [4][9]. - In March, the repo balance increased significantly, and the bond market leverage ratio rose by 0.6 pct month - on - month to 106.8%. Although the increase was similar to the historical average for the same period, it remained at a low level since 2022. By institution, the leverage ratios of commercial banks and non - bank institutions both increased but were still at relatively low levels [4][38]. 3. Summary by Directory 3.1. Inter - bank CD Supply Surge Drove a 2.7 - Trillion - Yuan Increase in March Bond Custody Volume - The total bond custody scale in March increased by 265.56 billion yuan month - on - month, with the increment mainly from inter - bank CDs, reaching 1.12 trillion yuan. The custody increments of other interest - rate bonds and credit bonds decreased slightly. For interest - rate bonds, the net financing and net payment of treasury bonds increased, but the custody increment decreased slightly; the custody increment of local bonds decreased as the issuance of replacement bonds slowed; and the custody increment of policy - bank bonds decreased due to an increase in the maturity volume. For credit bonds, the custody increments of medium - term notes and short - term commercial paper decreased, and the custody scales of enterprise bonds and PPNs continued to decline [7]. - The commercial bank bond custody volume decreased by 53 billion yuan from an increase of 120 billion yuan in the previous month, while the non - bank bond custody increment increased by 338 billion yuan to 448 billion yuan. The custody scale decline of credit - asset - backed securities narrowed to 130 billion yuan. The issuance scale of inter - bank CDs in March reached a record high, with the custody increment rising by 634.4 billion yuan to 1.115 trillion yuan, which was the main reason for the increase in March's custody increment [7]. 3.2. In March, Trading Desks Massively Increased Holdings of Inter - bank CDs and Interest - Rate Bonds, Significantly Easing Commercial Banks' Liability Pressure - **Broad - based Funds**: The custody increment of broad - based funds increased significantly by 158.5 billion yuan to 170.5 billion yuan. They increased their holdings of inter - bank CDs, government bonds, local bonds, and policy - bank bonds, and reduced their holdings of credit bonds and commercial bank bonds. Relative to the stock, they increased their allocation of bonds, mainly inter - bank CDs and various interest - rate bonds [13]. - **Securities Firms**: The bond custody scale of securities firms increased by 1.145 billion yuan from a decrease of 560 million yuan in the previous month, mainly by increasing their holdings of treasury bonds. Relative to the stock, they also increased their allocation of bonds, mainly treasury bonds [17]. - **Insurance Companies**: The bond custody increment of insurance companies slightly decreased by 1.48 billion yuan to 9.64 billion yuan. They reduced their holdings of medium - term notes and increased their holdings of local bonds, among others. Relative to the stock, their bond - allocation strength weakened slightly [20]. - **Overseas Institutions**: The bond custody increment of overseas institutions increased by 7.19 billion yuan to 14.18 billion yuan, reaching a new high since August last year. They significantly increased their holdings of inter - bank CDs and increased their holdings of treasury bonds but reduced their holdings of policy - bank bonds. Relative to the stock, they increased their bond - allocation strength [26]. - **Other Institutions**: The bond custody increment of other institutions decreased from an increase of 60.18 billion yuan in the previous month to a decrease of 990 million yuan, mainly affected by the reduction in the net investment of central bank's outright reverse repurchase. They reduced their holdings of local bonds, policy - bank bonds, and treasury bonds and also reduced their holdings of inter - bank CDs, medium - term notes, and short - term commercial paper. Relative to the stock, they reduced their bond allocation [28]. - **Commercial Banks**: The bond custody scale of commercial banks increased by 58.17 billion yuan, with a decrease of 83.66 billion yuan compared to the previous month. They significantly reduced their holdings of inter - bank CDs, and also reduced their holdings of policy - bank bonds, short - term commercial paper, and commercial bank bonds. Relative to the stock, they reduced their bond allocation [31]. - **Credit Unions**: The bond custody volume of credit unions decreased from an increase of 8.67 billion yuan in the previous month to a decrease of 1.9 billion yuan, mainly due to a large - scale reduction in inter - bank CD holdings. Relative to the stock, they reduced their bond allocation [34]. 3.3. In March, the Bond Market Leverage Ratio Seasonally Rebounded but Remained at a Low Level Since 2022 - In March, the repo balance increased significantly, and the bond market leverage ratio rose by 0.6 pct month - on - month to 106.8%. The increase was similar to the historical average for the same period but remained at a low level since 2022. By institution, the leverage ratio of commercial banks rose by 0.6 pct to 103.2%, only higher than that in January - February this year; the non - bank institution leverage ratio rose by 0.5 pct to 115.9%, still at a relatively low level since April 2022. Among non - bank institutions, the leverage ratios of securities firms and non - legal - person products increased to 200.7% and 114.4% respectively, remaining near historical lows [38]. - In broad - based funds, the repo balances of various institutions rebounded. The repo balances of money market funds and wealth management products increased significantly but were still near historical lows. The repo balances of insurance companies and other products with relatively stable liabilities were close to the high in January this year, and the repo balance of non - money market products of fund companies was relatively stable, still below the pre - March 2023 level [38].