1. Report Industry Investment Rating No information about the industry investment rating is provided in the report. 2. Core Views of the Report - Second - batch 14 science - innovation bond ETFs were launched, with a total of about 40 billion yuan in raised funds. The report analyzes their impact on index component bonds and the potential of component bonds [3][9]. - Despite the continuous adjustment of the bond market, the total scale of credit bond ETFs increased in August, reaching around 350 billion yuan. Science - innovation bond ETFs contributed most of the scale increment, while the scale of benchmark market - making credit bond ETFs declined [3][9]. - Since July 18, component bonds of various tenors and implicit ratings have been adjusted to different degrees. Shorter - term bonds are more resilient, and the longer the tenor, the greater the adjustment. There is a certain divergence among investors regarding the future market of component bonds [4][47]. - Based on the experience of benchmark market - making credit bond ETFs, the scale of ETFs has a significant impact on component bonds. The upcoming expansion of science - innovation bond ETFs will bring about 40 billion yuan in incremental funds, and component bonds of science - innovation bonds are more resilient than market - making component bonds. However, the excess return of current component bonds may be relatively limited [4][49]. - Considering that interest rates have risen to a stage high, after the listing of the second - batch science - innovation ETFs, the market demand has increased. Without unexpected shocks, the liquidity of component bonds is expected to remain good, and they can be allocated from a coupon - oriented perspective [6][50]. 3. Summary According to the Table of Contents 3.1 How Have Credit Bond ETFs Performed Recently? - Despite the continuous adjustment of the bond market, the total scale of credit bond ETFs increased in August, currently around 350 billion yuan. Science - innovation bond ETFs contributed most of the scale increment, with a total increase of 27.8 billion yuan. The scale of benchmark market - making credit bond ETFs decreased by 10.7 billion yuan compared to July 18, while the scale of urban investment bond and corporate bond ETFs changed little, and the scale of short - term financing ETFs increased by 5.7 billion yuan [9][11]. - In terms of secondary - market trading activity, the turnover rates of market - making credit bond and science - innovation bond ETFs are in a fluctuating downward trend, with the current 7 - day moving average turnover rates around 20% and 30% respectively. The turnover rate of short - term financing ETFs has been rising, increasing from about 20% to over 50% since the second half of the year [11]. - Since the beginning of the year, among the indices tracked by credit bond ETFs, the Shanghai Urban Investment Bond index has the largest increase (1.53%), followed by the Shenzhen AAA Science - innovation Bond (1.40%) and the ChinaBond AAA Science - innovation Bond (1.24%) [15]. 3.2 How Have the Component Bonds of the Science - innovation Bond Index Performed? - Since the second half of the year, the performance of component bonds of the science - innovation bond index can be divided into three stages: rapid decline in valuation during the ETF application stage in June; intensified bond - grabbing market after the subscription ended on July 7, with component bond valuation inverting; and since the official listing of science - innovation bond ETFs on July 17, the excess spread of component bonds has oscillated and turned positive, showing signs of catch - up decline in the recent two weeks [17][19]. - From the perspective of low - valuation transactions and turnover rates, since the beginning of the year, science - innovation bonds have mostly had low - valuation transactions. After late July, high - valuation transactions occurred intensively, and the turnover rate continued to decline after August, indicating that investors have certain divergence regarding the future market of component bonds [4][17]. - As of September 12, high - grade component bonds of various tenors are still undervalued compared to medium - and short - term notes of the same tenor and rating. Since the bond market adjustment on July 18, component bonds of various tenors and implicit ratings have been adjusted to different degrees, with shorter - term bonds being more resilient [21]. 3.3 Will the Component Bonds Have Excess Performance? - For benchmark market - making credit bond ETFs, in the first quarter, the market was in adjustment, and the scale increased slowly. In the second quarter, the scale grew rapidly, and the excess spread of component bonds decreased significantly. After late July, the scale declined, and the excess spread of component bonds widened [25][26]. - The upcoming expansion of science - innovation bond ETFs will bring about 40 billion yuan in incremental funds, and the component bonds of science - innovation bonds are more resilient than market - making component bonds. However, the excess return of current component bonds may be relatively limited due to the weaker environment for credit spread compression in the fourth quarter, institutions' early "bond hoarding" in the second - batch, and the implementation of positive factors in the first - batch [4][32][49]. 3.4 How to Allocate Component Bonds in the Future? - As of September 12, 10 science - innovation bond ETFs hold a total of 636 individual bonds. Currently, science - innovation bond ETFs prefer component bonds with tenors of 2 - 3 years and 3 - 5 years, with the proportion of holdings in the balance of index component bonds being 12.3% and 10.3% respectively, and the overall portfolio duration ranging from 2.98 to 4.14 years [33]. - Since July 25, the weighted average remaining term of component bonds of science - innovation bond ETFs has shown an inverted V - shape. After the listing of ETFs, the duration was generally lengthened quickly, and then continued to decrease during the adjustment period, currently dropping to 3.73 years [39]. - Considering that interest rates have risen to a stage high, after the listing of the second - batch science - innovation ETFs, the market demand has increased. Without unexpected shocks, the liquidity of component bonds is expected to remain good, and they can be allocated from a coupon - oriented perspective [6][50]. 3.5 Summary - The second - batch 14 science - innovation bond ETFs were launched, with a total of about 40 billion yuan in raised funds. The report analyzes their impact on index component bonds and the potential of component bonds [46]. - Credit bond ETFs' scale increased in August, with science - innovation bond ETFs contributing most of the increment. The Shanghai Urban Investment Bond index had the largest increase since the beginning of the year [3][46]. - Since July 18, component bonds of science - innovation bonds have been adjusted, and there is divergence among investors regarding their future market. The excess return of component bonds may be limited, but they can be allocated from a coupon - oriented perspective [4][47][49].