1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Core Viewpoints - In the next week, the main focus of the funding situation will shift to month - end liquidity. The net payment of government bonds will increase by over 70 billion yuan. Attention should be paid to the central bank's end - of - quarter OMO injection and the MLF roll - over operation on the 25th. The funding situation is expected to remain balanced and slightly loose [1]. - In the next week, the maturity scale of certificates of deposit (CDs) will exceed one trillion yuan, presenting significant supply pressure. However, the issuance pressure of CDs is expected to gradually ease. As the month - end approaches, the funding situation may fluctuate, and CD yields may continue to show a volatile trend [1]. - Funds remain the main buyers of interest - rate bonds. In the past week, the net purchase scale was approximately 141.2 billion yuan, showing a significant increase in volume [1]. 3. Summary by Directory 3.1 Weekly Liquidity Tracking 3.1.1 Fund Review - From June 16 to June 20, 2025, 858.2 billion yuan of 7 - day reverse repurchase funds and 182 billion yuan of 1 - year MLF matured. The central bank injected 960.3 billion yuan of 7 - day funds, resulting in a net weekly fund withdrawal of 7.99 billion yuan. The OMO stock decreased to 960.3 billion yuan. The central bank conducted a 400 - billion - yuan 6 - month outright reverse repurchase operation this week [10]. - During the statistical period, the RMB/USD spot exchange rate depreciated by 1.86 basis points due to the uncertainty of US tariffs and the increasing expectation of a Fed rate cut [10]. - In terms of government bond progress, based on the issuance start - date, the net financing of treasury bonds in the past week was 135.07 billion yuan, and the net financing since the beginning of the year was 3.23916 trillion yuan, completing 48.6% of the annual plan. The issuance of new local bonds (new general bonds + new special bonds) in the past week was 69.722 billion yuan, and the issuance since the beginning of the year was 2.07865 trillion yuan, completing 40.0% of the annual plan. As of June 20, the issuance of special refinancing bonds for replacing hidden debts had reached 1.74 trillion yuan, completing 86.8% of the annual plan [14]. - In terms of fund structure, during the statistical period, the lending scale of state - owned and joint - stock banks increased, while that of money market funds and wealth management products decreased. The overall borrowing scale of non - banking institutions decreased slightly. Thanks to the central bank's injection of medium - and long - term liquidity, the DR series declined, with the overnight rate running below the policy rate. The spread between the 7 - day rate and the policy rate narrowed to less than 10bp. Due to quarter - end needs, the 14 - day funding rate increased marginally. The R series showed a similar trend to the DR series, and the liquidity stratification remained at a low level. Overall, the funding situation showed a pattern of "increasing volume and decreasing price" this week, with a marginal tightening feeling on Thursday and Friday. After the central bank's intervention, the overall feeling was balanced [17]. 3.1.2 CD Review - In the primary market, during the statistical period, the net financing scale of inter - bank CDs was 8.068 billion yuan, with a total issuance of 110.232 billion yuan and a maturity of 102.164 billion yuan. In the next three weeks, 113.781 billion, 24.579 billion, and 51.052 billion yuan of inter - bank CDs will mature respectively. The primary issuance rate decreased slightly, with an average issuance rate of 1.6556% (previous value: 1.6744%) [20]. - In the secondary market, during the statistical period, the core buyers such as money market funds, wealth management products, and funds continued to increase their holdings. Large - scale banks changed from selling to buying, and insurance companies and other product accounts continued to increase their holdings. City commercial banks, rural commercial banks were the main counterparties. The secondary - market yield of CDs fluctuated and decreased slightly during the week, and the yield curve steepened slightly. The yields of 1M/3M/6M/9M/1Y CDs changed by - 0.02BP/ - 2.25BP/ - 2.50BP/ - 2.70BP/ - 3.34BP respectively [21]. 3.1.3 Next Week's Focus - In terms of the funding situation, in the past week, the funding situation fluctuated due to quarter - end liquidity needs. On Thursday, the funding situation tightened marginally, and the intraday interest rate started to rise. However, the central bank immediately switched to net injection to support the funding situation. On Friday, the 7 - day funding rate returned to a low level, and DR007 dropped below 1.50%. Recently, thanks to the central bank's injection of medium - and long - term liquidity, the lending scale of large - scale banks increased significantly. The overnight rate has been running below the policy rate, and the spread between the 7 - day rate and the policy rate has narrowed to less than 10bp. The funding situation smoothly passed the tax - payment period. In the next week, the main focus of the funding situation will shift to month - end liquidity, and the net payment scale of government bonds will increase by over 70 billion yuan. Attention should be paid to the central bank's end - of - quarter OMO injection and the MLF roll - over operation on the 25th. The funding situation is expected to remain balanced [26]. - In terms of CDs, on the supply side, in the past week, the net financing of CDs remained negative. The central bank's injection of medium - and long - term liquidity alleviated the liability pressure of banks, and the primary CD rate decreased slightly. On the demand side, the demand from core buyers increased marginally, and the secondary - market yield of CDs fluctuated and decreased slightly during the week. In the next week, the maturity scale of CDs will exceed one trillion yuan, presenting significant supply pressure. However, the issuance pressure of CDs is expected to gradually ease. As the month - end approaches, the funding situation may fluctuate, and CD yields may continue to show a volatile trend [27]. 3.2 Weekly Institutional Behavior Tracking 3.2.1 General Credit Bonds Show an Obvious Trend of Extending Duration - Under the assumption of long - term narrow - range fluctuations in the risk - free rate, the market has further explored credit - spread strategies. Since mid - May, the trading duration of industrial bonds has rapidly increased, with the latest trading duration approaching 4 years. The liquidity of long - duration credit bonds has indeed improved. The trading duration of urban investment bonds has remained relatively stable, currently at around 2.5 years [3][29]. - Driven by the long - duration credit - sinking strategy, the remaining space may be quickly exhausted. In terms of spreads, the 3 - year - 1 - year AAA medium - and short - term note term spread is 9 - 10bp away from the previous low, and the 5 - year - 3 - year AAA medium - and short - term note term spread is 7 - 8bp away from the previous low. The credit - bond duration - sinking situation has reached an extreme level. In terms of yield distribution, currently, the yields of most general credit bond assets with a maturity of over 3 years are concentrated below 2.1%, indicating limited high - yield assets available for exploration [3][30]. 3.2.2 Review of Key Secondary - Market Transactions by Institutions - Large - scale banks: In the past week, the trend of large - scale banks' net buying of treasury bonds with a maturity of less than 3 years continued, with a buying scale of approximately 51.7 billion yuan [35]. - Interest - rate bond buyers: Funds remain the main buyers of interest - rate bonds. In the past week, the net purchase scale was approximately 141.2 billion yuan, showing a significant increase in volume. Rural commercial banks were one of the main sellers, with a net selling scale of approximately 127.2 billion yuan. In the case of 20 - 30 - year treasury bonds, funds also maintained strong buying power, while rural commercial banks and insurance companies were the main bond suppliers [35]. - Inter - bank CD buyers: The main buyers of CDs are wealth management products and other products, while the main sellers are city commercial banks, rural commercial banks, and securities firms [35]. - Credit - bond buyers: The net purchase scale of major non - banking buyers continued to increase significantly. Funds, wealth management products, and other products were the main net buyers, with funds having the largest incremental purchase. In the past week, the net purchase scale of funds reached 46.8 billion yuan. The net purchase scales of credit bonds with a maturity of less than 3 years and ultra - long - term credit bonds with a maturity of over 5 years remained relatively stable, and the non - banking buyers showed a significant increase in volume [35]. - Subordinated - bond buyers: Funds continued to net sell subordinated bonds with a maturity of less than 2 years, with a net selling scale of approximately 5.1 billion yuan in the past week. Wealth management products and other products net bought 4.5 billion yuan. For subordinated bonds with a maturity of 2 - 5 years, the main buyers slightly reduced their purchases. Funds and other products had the largest net purchase scales, at 14.5 billion yuan and 12.2 billion yuan respectively. For subordinated bonds with a maturity of 5 - 10 years, the net purchase scale of funds increased slightly, reaching 4.5 billion yuan in the past week [35]. 3.2.3 High - Frequency Data Tracking of the Bond - Market Microstructure - On June 20, the median of the 10 - day rolling average duration of medium - and long - term bond funds was 3.87 years, showing a significant increase compared to the previous period [36]. - In the past week, the bond - market leverage ratio was 107.83%, continuing to rise compared to the previous period [38]. - On June 20, the 10Y China Development Bank bond - 10Y treasury bond term spread was 3.74bp, showing a volatile narrowing trend. The 1Y China Development Bank bond - R001 spread was 4.87BP, and the spread between short - term bond yields and funding prices slightly widened [41].

Group 1: Credit Bond Strategy - The credit bond market is expected to continue in a volatile state, with a focus on interest rate strategies and band trading being more favorable than pure selection of varieties [5][38] - The strategy suggests focusing on short to medium-term credit bonds and high-grade long-term bonds to seek opportunities for interest rate compression [5][38] - The recommendation is to increase allocation in high-grade bonds from local government financing vehicles, real estate, and stable industries during market adjustments [5][38] Group 2: Local Government Financing Bonds - The transformation of local government financing vehicles is entering a complex phase, with potential pricing discrepancies as platforms adapt to new regulations [2][43] - The issuance of local government bonds is expected to remain low due to strict regulatory oversight and the ongoing transition of platforms [2][43] - Focus on short to medium-term bonds from regions with stable cash flows, particularly in Guangdong, Hubei, Jiangsu, and Henan, is recommended [2] Group 3: Financial Bonds and Varieties - High-grade perpetual bonds can be traded in response to interest rate fluctuations, but the trading space is limited and requires high trading standards [3][39] - The strategy includes focusing on high-grade bonds with a maturity of 3-5 years for stable institutions, while actively trading lower-grade bonds during market adjustments [3][39] - The expansion of TLAC non-capital instruments and their comparison with secondary capital bonds is highlighted as an area of interest [3][39] Group 4: Industrial Bonds - Industrial bonds have shown some recovery in profitability, but performance remains varied across sectors, with strong performance in automotive, machinery, and utilities, while real estate and construction sectors lag [4] - The recommendation is to focus on high-quality state-owned enterprises and stable private enterprises for medium-term investments [4] Group 5: Real Estate Bonds - The real estate sector is under pressure, with a recommendation to focus on high-grade bonds from state-owned enterprises while monitoring the recovery of the sector [4] - The potential for policy support in the real estate market could enhance recovery in core cities, but caution is advised for lower-tier cities [4] Group 6: Asset-Backed Securities (ABS) and Public REITs - The market for consumer finance ABS is expanding, with opportunities for variety exploration in a volatile market [3][39] - Public REITs are recommended to balance opportunities in both primary and secondary markets, focusing on stable projects [3][39]