1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Core Views of the Report - In 2026, the overall supply of credit bonds is expected to increase, with a total net financing of 3.13 trillion yuan, up 330.5 billion yuan from 2025. Industrial bonds will be the main contributor, with a net financing of 2.5 trillion yuan [1][9]. - The regulatory tightening on urban investment platforms will continue in 2026, and the net financing of urban investment bonds is expected to shrink further to -416.3 billion yuan. The net financing of non - bank institutional bonds is expected to increase to 44.29 billion yuan. The net financing of commercial bank financial bonds is expected to be close to 2025, at 24.43 billion yuan, and the net financing of bank secondary and perpetual bonds may drop to 36.44 billion yuan [1][10][19]. - In the week of 2025/12/1 - 12/5, the yields of credit bonds increased across the board. Non - financial credit bonds performed better than financial bonds, and among financial bonds, 10 - year brokerage sub - bonds performed best. Looking ahead, credit bonds may show a volatile trend, and a coupon strategy is recommended [2][24]. 3. Summary by Relevant Catalogs 3.1 2026 Credit Bond Supply Estimation - Overall, in 2026, driven by the growth of industrial bond net financing, the supply of credit bonds is expected to increase. Industrial bonds are the main contributor to supply, with a net financing of 2.5 trillion yuan, an increase of 468.6 billion yuan from 2025 [9][15]. - Urban investment bonds: Due to continued strict supervision, the net financing is expected to shrink to -416.3 billion yuan, a decrease of 212.4 billion yuan from 2025 [10]. - Non - bank institutional bonds: With the expected recovery of the equity market, the full implementation of the I9 standard, and high refinancing pressure, the net financing is expected to reach 44.29 billion yuan, an increase of 11.97 billion yuan from 2025 [10]. - Commercial bank financial bonds: Under the policy guidance of淡化 "scale concept", the net financing is expected to be 24.43 billion yuan, close to 2025 [19]. - Bank secondary and perpetual bonds: Affected by factors such as state - owned bank capital injection, debt replacement, and the substitution of TLAC bonds, the net financing is expected to be 36.44 billion yuan, a decrease of 46.3 billion yuan from 2025 [19]. 3.2 Credit Bond Yield Overview - In the week of 2025/12/1 - 12/5, credit bond yields increased across the board. Non - financial credit bonds outperformed financial bonds, and among financial bonds, 10 - year brokerage sub - bonds performed best [24]. - Urban investment bonds generally showed a feature that the longer the duration, the greater the increase in yield. The 10 - year bonds had the largest average increase of 7bp [24]. - Industrial bonds: High - rating and short - duration bonds had a significantly lower average increase in yield than other types of bonds [24]. - Financial bonds: The increase in yield was generally greater than that of general credit bonds of the same term, and short - duration bonds had a smaller increase than medium - and long - duration bonds [25]. 3.3 Primary Market 3.3.1 Issuance Volume - In the week of December 1 - 5, 2025, the issuance scale of credit bonds decreased both month - on - month and year - on - year. The net financing decreased month - on - month and increased year - on - year. The net financing of urban investment bonds, industrial bonds, and financial bonds decreased by 4 billion yuan, 74.2 billion yuan, and 37.9 billion yuan respectively month - on - month [35]. 3.3.2 Issuance Cost - The average issuance interest rate of credit bonds increased. The average issuance interest rate of urban investment bonds decreased by 1.4bp month - on - month, while that of industrial and financial bonds increased by 15.8bp and 4.6bp respectively [41]. 3.3.3 Issuance Term - The average issuance term of credit bonds decreased month - on - month. The average issuance terms of urban investment bonds, industrial bonds, and financial bonds decreased by 0.13 years, 0.02 years, and 0.19 years respectively [45]. 3.3.4 Cancellation of Issuance - In the week of December 1 - 5, 2025, the number of credit bond cancellations increased month - on - month, while the scale decreased. Nine bonds were cancelled, an increase of 2 from the previous week, and the total cancellation scale was 3.738 billion yuan, a decrease of 0.479 billion yuan [47]. 3.4 Secondary Market 3.4.1 Trading Volume - The trading volume of all types of credit bonds decreased compared with the previous week, and the trading volume of industrial bonds decreased by more than 50 billion yuan [53]. - In terms of remaining term, the trading terms of urban investment and industrial bonds extended, while the trading term of bank secondary capital bonds shortened [53]. 3.4.2 Trading Liquidity - This week, the turnover rates of industrial and financial bonds decreased, while that of urban investment bonds remained flat. Among different terms, the turnover rates of different types of bonds showed different trends [56]. 3.4.3 Spread Tracking - This week, the spreads of urban investment bonds narrowed for most bond types, except for 1 - year, 10 - year, and 5 - year AA + and AA(2) bonds. The spreads of bank secondary and perpetual bonds widened across the board, and the spreads of brokerage sub - bonds mostly widened, while those of insurance sub - bonds widened across the board [64][70][72]. 3.5 Weekly Hot Bonds Overview - Based on qeubee's bond liquidity scores, the top 20 urban investment bonds, industrial bonds, and financial bonds in terms of liquidity are selected for investors' reference [74]. 3.6 Credit Rating Adjustment Review - According to domestic rating agencies, this week, the debt rating of 1 bond was upgraded, and there was no downgrade of debt ratings [80].

Report Information - Report Title: Credit Investment Methodology Series IV: The Logic of Credit Bond Supply and Its Significance for Credit Strategies [3] - Report Date: July 29, 2025 [2] - Analysts: Liu Lu, Zhang Junrui [3] Industry Investment Rating - Not provided in the given content Core Viewpoints - Credit bond supply is mainly influenced by corporate debt - financing demand, loan - bond spread, and regulatory policy differences between bond and loan financing. Credit bond supply has obvious seasonality and its quantity - price relationship is complex, with significant implications for credit strategies [8][9]. - In normal times, price dominates quantity, but major regulatory policy changes can lead to supply changes that dominate yield and credit spread trends. This year, H2 regulatory policies are favorable for credit bond supply but unfavorable for urban investment bond supply, potentially widening credit spreads and making urban investment bonds outperform industrial bonds [9]. Summary by Related Catalogs Factors Affecting Credit Bond Supply - Corporate Debt - Financing Demand: Credit bonds are a form of corporate debt financing, and corporate debt - financing growth is a leading indicator of economic growth, leading GDP growth and corporate employment demand by about 9 months. The balance growth rates of loans and credit bonds have correlation coefficients of 0.71 and 0.86 with corporate debt - financing balance growth, respectively [8][11]. - Loan - Bond Spread: Credit bond net financing is positively correlated with the loan - bond spread (general loan rate - 3YAA medium - term note rate). Since Q2 2011, the correlation coefficients between the year - on - year change of the loan - bond spread and the year - on - year change of credit bond net financing, industrial bond net financing, and urban investment bond net financing are 0.48, 0.55, and 0.07 respectively; since 2021, they are 0.72, 0.91, and - 0.34 respectively [12]. - Regulatory Policy Differences: When credit bond financing regulatory policies are relaxed or loan financing regulatory policies are tightened, companies will issue more credit bonds. For example, in 2012, the tightening of urban investment loans and the relaxation of urban investment bond review led to an increase in the ratio of new credit bonds to new loans [8][18]. - Seasonality: Quarterly, credit bond net financing decreases quarter by quarter. From 2019 - 2024, the median proportion of quarterly credit bond net financing to annual net financing is 40%, 23%, 19%, and 7% respectively. Monthly, due to bond issuance review requirements for financial reports and the end - of - quarter loan impulse, April has a significantly higher credit bond financing proportion than corporate loan financing, while May, September, and December have significantly lower credit bond financing proportions [8][20][27]. Relationship between Credit Bond Quantity and Price - Normal Relationship: Credit bond yield is negatively correlated with credit bond net financing. Rolling 12 - month credit bond net financing and credit bond interest rates are mostly negatively correlated, and since 2020, interest rates have a certain leading nature. Credit spread is negatively correlated with the ratio of credit bond net financing to government bond net financing, with the former leading the latter by about 3 months. After removing the linear trend, the correlation coefficient between the 3 - month leading credit spread and the ratio of credit bond net financing to government bond net financing since 2019 is - 0.39, and since November 2022, it has reached - 0.51 [31][32]. - Reverse Influence: When regulatory policies are strong, credit bond supply can affect spreads. For example, from February - June 2020, increased credit bond supply led to wider credit spreads the next month. Since 2021, regulatory policies have restricted urban investment bond issuance, narrowing the urban investment - industrial spread and urban investment bond rating spread [33]. Implications for Credit Strategies - Policy Focus: Analyze regulatory policy - driven credit bond supply changes. This year, H2 regulatory policies are favorable for credit bond supply but unfavorable for urban investment bond supply, so credit spreads may widen, and urban investment bonds may outperform industrial bonds [9][41]. - Supply Analysis: This year, H2 regulatory policies are favorable for corporate bond issuance, while urban investment bond financing regulatory policies may tighten. Government bond net financing is expected to decrease by 1.9 trillion yuan compared to H2 2024, while credit bond net financing may increase year - on - year [44][45].

Report Industry Investment Rating No relevant content provided. Core Viewpoints - Since 2024, the supply pattern of the credit bond market has been reshaped, with industrial bonds and secondary and perpetual (Er Yong) bonds replacing urban investment bonds as the main forces, showing significant structural characteristics. In 2025, affected by multiple factors such as market fluctuations and stricter regulations, the supply of credit bonds has slightly decreased year-on-year. The supply of industrial bonds remains high, but the supply of ultra-long-term bonds has declined. The supply of Er Yong bonds has increased to some extent, with state-owned large commercial banks as the main issuers. The supply of urban investment bonds is still restricted, and the real estate financing remains sluggish. The highlight of this year's supply is the science and technology innovation bonds, which have been extended to financial institutions and the issuance has accelerated. [1][11][12] - Looking forward to the second half of the year, the overall supply may be flat, and the net supply may still be dominated by central and local state-owned enterprise industrial bonds and national and joint-stock Er Yong bonds. Attention should be paid to the expansion of science and technology innovation bonds. In the long term, the core of credit supply growth lies in the recovery of real financing demand. [31] Summary by Directory Credit Hotspots: Credit Bond Supply Characteristics - From 2020 to 2023, urban investment bonds were the main contributor to the credit bond market. After the release of the "Document 35" in 2023, under the strict supervision of urban investment bonds, the net financing amount decreased significantly. In 2024, due to the continuous evolution of the asset shortage, the supply of industrial bonds increased, especially the issuance of long-term varieties over 10 years. [11] - As of May 31, 2025, the net financing amount of credit bonds was 10,824 billion yuan, a year-on-year decrease of 19.4%. Industrial bonds are still the main force in credit bond supply, and the issuance entities continue to concentrate on high-quality ones. The real estate bond market is still in the process of repair and adjustment, and the net financing amount remains at a relatively low level. The supply of urban investment bonds is limited under continuous strict supervision and debt resolution. The supply of Er Yong bonds has increased, with state-owned large commercial banks as the main issuers. [12] - In 2025, the net financing amount of industrial bonds is lower than the same period last year, with a year-on-year decrease of 9.12%. The supply of industrial bonds is mainly within 3 years, and the net supply of industrial bonds over 10 years has decreased significantly. The supply of Er Yong bonds has decreased year-on-year, and joint-stock banks have become the main supply force. [14][19] - In May 2025, the issuance of science and technology innovation bonds accelerated, with a monthly issuance of over 350 billion yuan, a record high. Structurally, financial science and technology innovation bonds accounted for 62%, mainly commercial bank bonds, and non-financial enterprise science and technology innovation bonds accounted for 38%, mainly central and local state-owned enterprises. [31] Market Review: The Central Bank Announced Trillion-Level Reverse Repurchase Operations, and Er Yong Bonds Performed Relatively Stronger - From May 30 to June 6, 2025, the central bank announced a 1-trillion-yuan outright reverse repurchase operation at the beginning of the month, and the money market was loose. Interest rate bonds strengthened, while corporate credit bonds showed mixed performance. The short-term yields of corporate credit bonds increased slightly, the medium and long-term yields of medium and low-grade bonds performed relatively well, and most of the spreads were passively widened. The yields of Er Yong bonds decreased by about 3BP, and the short-term spreads decreased slightly. [2][36] - Last week, the buying volume continued to increase, with wealth management products net buying 10.4 billion yuan and funds net buying 15.5 billion yuan. The median spreads of public bonds in various industries increased by about 1BP, and the median spreads of urban investment bonds in various provinces showed mixed performance, with the spreads in Guizhou decreasing significantly. [2][36] Primary Issuance: Overall Issuance Declined Due to Holiday Factors, and Most Issuance Interest Rates Increased - From June 3 to June 6, 2025, the total issuance of corporate credit bonds was 196.5 billion yuan, a month-on-month decrease of 31%, and the total issuance of financial credit bonds was 19 billion yuan, a significant month-on-month decrease of 90%. The total net financing was 49 billion yuan, including a net repayment of 12 billion yuan for urban investment bonds and a net financing of 62.9 billion yuan for industrial bonds. The total net financing of financial credit bonds was 10.3 billion yuan. [3][57] - Affected by holiday factors, the issuance of both corporate and financial credit bonds decreased. In terms of issuance interest rates, the issuance interest rates of medium and short-term notes, except for AAA, showed an upward trend, and the average issuance interest rates of corporate bonds, except for AA+, also showed an upward trend. [3][57] Secondary Trading: Medium and Short-Term Maturities Were Actively Traded, and the Trading of Long-Term Maturities Decreased Slightly - The actively traded entities are mainly medium and high-grade, medium and short-term, and central and local state-owned enterprises. In terms of types, the actively traded entities of urban investment bonds are mainly divided into two categories: one is the mainstream high-grade platforms in economically strong provinces such as Jiangsu and Guangdong; the other is the core main platforms in relatively high-spread areas of large economic provinces (such as Shandong, Chongqing, and Sichuan). The actively traded entities of real estate bonds are still mainly AAA, and the trading maturities are mostly within 1 - 3 years. The actively traded entities of private enterprise bonds are also mainly AAA, and the trading maturities are mostly medium and short-term. [4][67] - Among the actively traded urban investment bonds, the trading volume of bonds with a maturity of over 5 years accounted for 3%, a slight decrease compared with the previous week (4%). [4][67]