Group 1 - The report identifies several key puzzles resolved in 2025, including the final determination of monetary policy, the stage bottom of the bond market, and the credit risk outlook, indicating that mainstream varieties do not require excessive concern [7] - The report highlights ongoing contradictions for 2026, such as the conflict between the macro narrative and micro sentiment, and the limited space for capital gains versus coupon strategies in the bond market [7] - The bond market is expected to be slightly bullish in 2026, with a focus on timing over selection, and a preference for coupon strategies over duration [7] Group 2 - The report outlines several long-term bullish factors for the bond market, including the experience of low interest rates in other economies, weak economic sentiment, and a lack of leverage among residents [8][9] - Short-term bearish factors are identified, such as the rising equity market attracting funds away from bonds, and the potential tightening of monetary policy due to inflation expectations [8][9] - The report emphasizes that the risk of credit bond defaults is diminishing, with the current market dominated by state-owned enterprises, reducing concerns over credit risk [31][26] Group 3 - The report provides specific strategies for different types of bonds, recommending a focus on financial bonds for their safety and liquidity, while suggesting a cautious approach to city investment bonds and a selective strategy for industrial bonds [10] - The financial bond market is highlighted as a key area for trading strategies, with a focus on liquidity rather than yield in a low coupon environment [10] - The city investment bond market is expected to remain stable until mid-2028, with opportunities for adjustment based on risk preferences and yield demands [10]

Core Viewpoint - The bond market has experienced a downward trend in yields, contrasting with the equity market's pullback, leading to a shift in investment strategies among funds towards shorter durations and a focus on risk management [2][6]. Market Performance - During the week of October 27 to November 3, bond yields declined, with the 10-year government bond yield falling approximately 5 basis points to 1.8% and the 1-year bond yield decreasing about 9 basis points to 1.38% [2]. - The average performance of medium to long-term pure bond funds recorded a return of 0.26%, while short-term bond funds achieved 0.11% [2]. Fund Duration Analysis - The median duration of pure bond funds decreased from 2.70 years in Q2 to 2.00 years in Q3, indicating a shift towards shorter duration investments [7]. - The divergence in duration among funds has increased, suggesting differing views among institutions regarding future market conditions [8]. Investment Strategy Shifts - Due to the declining investment attractiveness of the bond market, banks are transitioning from a passive allocation strategy to active management, focusing on trading capabilities and expanding non-interest income [6]. - Analysts predict that with the central bank's resumption of government bond purchases and increased liquidity, the previously pessimistic sentiment in the bond market is beginning to recover [6]. Future Outlook - The bond market is expected to face less pressure from the equity market due to a temporary easing of U.S.-China trade tensions, potentially creating a favorable environment for bond investments [8]. - The fourth quarter may present economic challenges, but a continued loose monetary environment could provide key opportunities for bond allocation as yields rise [8].