Group 1 - The report emphasizes maintaining duration as the year-end approaches, with a focus on medium to long-term credit varieties, particularly 4-5 year products which show marginal improvement in cost-performance despite still low spread levels [2][10][12] - The current yield range for long-term credit bonds (5 years and above) rated AA+ and above is between 2.16% and 2.66%, indicating a certain level of yield cost-performance [3][10] - The report notes that funds have significantly increased their allocation to 5-year and above credit bonds, reflecting a trend towards extending duration for yield [3][10] Group 2 - The report highlights key policies and events, including Tianjin's measures to support high-quality development of REITs, which aim to enhance capital market services for the real economy [4][19] - The upcoming revision of the "Commercial Bank M&A Loan Management Measures" is expected to broaden the scope of applicable loans and optimize loan conditions, which could facilitate mergers and acquisitions [4][19][24] - The report mentions that the National Development and Reform Commission has recommended 105 infrastructure REITs projects to the CSRC, with 83 already issued, indicating a normalization in the issuance of infrastructure REITs [4][19][24] Group 3 - The report indicates that the credit bond market has seen a majority of yields decline, with financial bonds performing better, while credit spreads have shown divergence [6][10] - The issuance scale of credit bonds this week was 269.9 billion, a decrease of 20.5 billion from the previous week, with net financing also down [7][10] - The report notes a decrease in trading activity in both the interbank and exchange markets for credit bonds, suggesting a decline in market liquidity [7][10]

Group 1: Fixed Income + Fund Tracking - The performance of fixed income + funds has shown significant volatility this year, with mixed results in October. The mixed, stock, and convertible bond funds increased by 0.16%, 0.17%, and 0.49% respectively in October [2][13] - Fixed income + funds have adjusted their growth allocation, becoming more cautious in credit strategies while slightly increasing exposure to market capitalization factors. The overall equity position remains stable, with a reduction in exposure to convertible bonds [4][18][23] - The selected fixed income + fund portfolio has outperformed the secondary bond index by 0.19% in October and by 0.54% year-to-date [5][28] Group 2: Pure Bond Fund Tracking - The mid-to-long-term pure bond fund index rose by 0.51% in October, with a year-to-date return of 0.80%. The short-term pure bond fund index increased by 0.28% in October and 1.21% year-to-date [6][36] - In terms of risk exposure, pure bond funds have increased their duration and high credit rating bond allocations, showing strong consistency in credit strategy adjustments [6][42][43] - The pure bond fund portfolio has also outperformed the mid-to-long-term pure bond fund index, with a 0.12% outperformance in October and a 0.19% excess return year-to-date [47][48]

Group 1 - The overall outlook for credit bonds in November remains optimistic, influenced by the new public fund redemption fee regulations and changes in the equity market [1][23] - The credit bond yield curve showed a downward trend in October, particularly after the central bank announced the resumption of government bond trading, leading to a better performance of credit bonds compared to interest rates [2][16] - Historical performance of credit strategies in November since 2021 indicates that most strategies have yielded positive returns, except for the negative impact seen in November 2022 due to a redemption wave [9][12] Group 2 - In October, the strategy of extending duration yielded the best returns among various credit strategies, with city investment bonds outperforming others [4][6] - The yield of 3Y AAA-rated secondary capital bonds decreased from 2.06% to 1.90% by the end of October, reflecting a strong upward trend in credit bonds [16] - The historical percentile rankings for various credit bonds indicate that there is still room for yields to decline, particularly for 5Y secondary capital bonds [22][23] Group 3 - The investment recommendation for November suggests maintaining a relatively optimistic stance on credit strategies, supported by high historical percentiles and a favorable liquidity environment [22][23] - The resumption of government bond trading and overall loose funding rates are expected to continue supporting the upward trend in credit bonds, although the depth of this trend remains to be observed [22][23] - The cost of liabilities for banks has decreased significantly, encouraging increased investment in bonds [22][23]

Group 1 - The simulated portfolio returns have rebounded this week, with most credit style portfolios outperforming interest rate style portfolios. The weekly returns for secondary ultra-long and city investment ultra-long strategies were 0.34% and 0.28% respectively, while credit style portfolios saw returns of 0.65% and 0.41% for the same strategies [2][14][15] - The recovery in returns has shifted from interest rate and medium-long duration strategies to ultra-long bond strategies. The average weekly return for credit style time deposit heavy portfolios increased by 3.6 basis points to 0.12%, the highest since August, while city investment heavy portfolios rose to 0.22%, an increase of approximately 12.1 basis points [2][16] - The average return for secondary capital bond heavy portfolios increased by nearly 20 basis points, with the secondary bond duration and mixed duration strategies showing weekly returns nearly equal to the ultra-long strategy. The secondary bond bullet strategy has shown a faster recovery, with cumulative negative returns since the third quarter narrowing to -0.36% [2][16] Group 2 - In terms of return sources, the coupon income from various strategy portfolios has declined, while the contribution from capital gains has increased. Among mainstream strategies, the coupon income for secondary bond bullet and duration strategies fell by more than 0.04 basis points, while city investment bonds and bank perpetual bonds maintained annualized coupon rates around 2.24% and 2.26% respectively [3][25] - The capital gains contribution for credit style portfolios accounted for most of the returns this week, with coupon contributions falling within the range of 5% to 30%, further compressing and increasing concentration compared to the previous week [3][25] Group 3 - Over the past four weeks, medium-long duration secondary perpetual strategies have shown cumulative returns at the forefront. The cumulative excess returns for perpetual bond duration, secondary bond bullet, and secondary bond duration strategies were 13 basis points, 11.2 basis points, and 11.1 basis points respectively [4][29] - The medium-long duration secondary perpetual bond strategy has rebounded significantly, but its volatility exceeds that of the downshift strategies. The cumulative return for the secondary bond downshift strategy reached 9.2 basis points, demonstrating both low volatility and strong recovery advantages [4][29] - From a strategy duration perspective, medium-long duration secondary perpetual bonds and ultra-long strategies exhibit stronger offensive attributes. The short-end time deposit strategy's excess returns have dropped to the lowest in three months, lacking aggressiveness in a bond bull market [4][32]

Group 1: Core Insights - The report indicates that the performance of equity-type and mixed-type fixed income plus funds has been volatile this year, with a positive performance in September, where mixed, equity, and convertible bond funds increased by 0.87%, 0.77%, and 0.15% respectively [3][14]. - The report highlights a continuous reduction in the position of convertible bond products after a prolonged period of steady growth, indicating a phase of adjustment [4][14]. - The overall risk exposure of fixed income plus funds in terms of bond duration remains stable, while there is an increase in the use of credit strategies, particularly with a notable rise in growth style exposure in equity assets [5][19][21]. Group 2: Fixed Income Plus Fund Tracking - The report outlines that a quarterly selection of 10 funds based on various metrics has been made to construct a preferred fixed income plus fund portfolio, which has outperformed the secondary bond fund index by 0.34% this year [6][27]. - The preferred portfolio's performance in September showed a slight underperformance against the secondary bond fund index by 0.22%, indicating a more stable performance overall [27]. - The report provides detailed tracking of the preferred portfolio's holdings, showcasing a diverse range of asset types and equity classifications [33][35]. Group 3: Pure Bond Fund Tracking - The pure bond fund index experienced a decline of 0.15% in September, with a year-to-date return of 0.29%, while the short-term pure bond fund index increased by 0.03% with a year-to-date increase of 0.93% [39]. - The report notes a significant adjustment in credit structure exposure for pure bond funds, with a general increase in credit bond allocation, reflecting a strong consistency in credit strategy adjustments [44]. - The preferred pure bond fund portfolio has also outperformed the medium to long-term pure bond fund index, with a slight outperformance of 0.01% in September and 0.07% year-to-date [50][56].

Group 1 - The core view of the report emphasizes that short-end sinking strategies have outperformed in September 2025, with various credit strategies yielding positive returns due to sufficient coupon income covering capital loss, although the contribution to overall returns was limited [2][3][4] - Historical performance of credit strategies in October since 2021 shows that most strategies have achieved positive returns, with a notable success rate for bullish credit positions in October [10][24] - The report suggests that in the current steep yield curve environment, increasing allocation to medium and long-term credit bonds and utilizing bond repurchase agreements to introduce leverage could significantly enhance the returns of the strategies [10][24] Group 2 - In September 2025, the market was cautious due to concerns over new public fund sales regulations, leading to a tightening of credit bond market sentiment [3][4] - The report highlights that the performance of various credit strategies in September was negatively impacted by rising interest rates, with some strategies recording capital losses exceeding 1% [3][4][5] - The anticipated liquidity support from the central bank's operations in October 2025 is expected to bolster the bullish logic for credit investments, despite potential constraints from institutional behavior and policy impacts [17][24]

Group 1 - The credit market in the first half of 2025 can be divided into four phases: a market correction, a recovery phase, a volatile market, and a continuation of market fluctuations with favorable supply-demand dynamics for credit [2][13][28] - The supply side in 2025 shows structural changes, including continued low supply of local government bonds, increasing supply of industrial bonds, and a steady issuance of technology innovation bonds [2][28] - On the demand side, public funds and other products are the main buyers of credit bonds, indicating strong market interest [2][28] Group 2 - Looking ahead to the second half of 2025, supply is expected to remain stable, and the anticipated growth in bank wealth management products will support market demand for credit [3][30] - The expansion of benchmark credit bond ETFs and technology innovation bond ETFs is expected to continue in the third quarter, contributing to market dynamics despite some ongoing debates [3][34] - The liquidity environment remains favorable for the bond market, with a focus on selective paths for credit spread compression, suggesting that concerns about significant adjustments may not be immediate [3][30]

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].

Group 1 - The report indicates that the stock market's strength has led to short-term adjustment pressure on the bond market, resulting in a passive narrowing of credit spreads, particularly in short-duration bonds, with 1-year credit spreads across various ratings narrowing by 5-7 basis points [1][4] - The report highlights that the overall turnover rate of credit bonds has decreased from 2.36% to 2.21%, reflecting a reduction in market trading activity, with the weighted average transaction duration slightly increasing from 2.8 years to 2.9 years [2] - Fund managers are maintaining an allocation to credit bonds, although the intensity has weakened, with a shift towards shorter-duration bonds, while insurance companies have increased their net purchases of long-duration credit bonds [3] Group 2 - The report suggests that despite the stock market's upward pressure on the bond market, there remains a potential for short-term volatility, and it recommends a strategy of selectively increasing positions during adjustments rather than aggressively chasing gains [4] - The report notes that the average yield of credit bonds has generally increased, with the 3-year and 5-year credit bonds showing significant upward movement, particularly in lower-rated municipal bonds [10][17] - The report identifies specific sectors such as steel and coal that may benefit from the "anti-involution" policy, indicating potential opportunities in industry bonds [4]

Summary of Key Points from Conference Call Records Industry Overview - The records primarily focus on the **bond market** outlook for June 2025, with insights into **monetary policy**, **credit bonds**, and specific sectors such as **real estate** and **coal** industries. Core Insights and Arguments 1. **Bond Market Outlook for June 2025**: The bond market is expected to continue the volatile trend observed since May, primarily due to uncertainties in tariff negotiations and variable fundamental data. The trading range for the 10-year government bond is anticipated to be between **1.6% and 1.7%** [2][3][11]. 2. **Monetary Policy Shift**: The People's Bank of China has shifted its monetary policy focus from preventing capital turnover to stabilizing growth, creating a relatively friendly monetary environment. The dual interest rate cuts in May were in line with expectations, but the positive effects were quickly absorbed by the market [3][8]. 3. **Seasonal Factors**: Historical data from 2019 to 2024 indicates that the 10-year government bond typically experiences limited volatility in June, with fluctuations generally within **10 basis points**. Seasonal factors and government bond issuance are expected to influence liquidity significantly [4][6]. 4. **Liquidity Concerns**: The liquidity situation in June is complicated by a **1.5 trillion yuan** net financing issuance and **4 trillion yuan** in maturing certificates of deposit, raising concerns about short-term volatility despite an overall favorable trend [7][8]. 5. **Credit Bonds**: The short-end credit spread has limited compression potential, while three-year varieties still have room for compression. Attention is drawn to **2A-rated** credit bonds for investment opportunities [6][12]. 6. **Real Estate Sector**: The real estate industry is in a bottoming phase, with a focus on the impact of policy relaxations in core first-tier cities. Recommendations include investing in safe-zone state-owned enterprise real estate bonds and high-cost performance **2A/2A+** rated bonds [16][17]. 7. **Coal Industry**: The coal sector has seen a decline in demand since 2024, leading to price fluctuations. The overall profitability has decreased, and cash flow from operating activities has contracted [19][21]. 8. **Steel Industry**: The steel sector faces severe oversupply issues, with a slight recovery in demand due to export boosts. However, domestic demand remains weak, leading to continued pressure on prices and profitability [20][21]. Additional Important Content 1. **Investment Strategies**: The second half of 2025 may present a significant investment window, with potential new monetary policies expected to be announced in July. Investors are advised to prepare for this period despite a lackluster June [5][11]. 2. **Credit Strategy**: The credit market shows varying performance across different maturities and ratings, with a focus on optimizing investment portfolios based on these dynamics [12][14]. 3. **Market Dynamics**: The convertible bond market has experienced a V-shaped recovery, indicating strong buying power despite the unclear upward trend in the equity market [22][24]. 4. **Risk Assessment**: The overall risk in the equity market is considered manageable, with liquidity remaining ample and policy expectations high, which supports the convertible bond market [23][30]. This summary encapsulates the key points from the conference call records, providing a comprehensive overview of the current state and outlook of the bond market and related sectors.