1. Report Industry Investment Rating The provided content does not mention the industry investment rating. 2. Core Viewpoints of the Report - The core purposes of the new bond VAT policy may include two aspects: unifying the bond market tax system and increasing government tax revenue to relieve fiscal pressure [2][15]. - The move to resume VAT collection on bonds may signal a gradual reduction in tax - incentives for the investment demand side in the bond and capital markets, and the reduction rhythm is affected by the maturity of asset categories and macro - economic and fiscal factors [2][15]. 3. Summary According to the Directory 3.1 Bond VAT Adjustment Policy Interpretation - Since August 8, 2025, interest income from newly - issued government bonds, local government bonds, and financial bonds will be subject to VAT, while previously issued bonds will remain tax - exempt until maturity. For new bonds, ordinary self - operating institutions and asset management products will be taxed at 6% and 3% respectively [1][14]. - The policy aims to unify the bond market tax system and increase government revenue. It may also indicate a gradual reduction in tax incentives in the bond and capital markets, with the reduction rhythm affected by asset category maturity and macro - economic and fiscal conditions [2][15]. 3.2 Impact of the New Bond VAT Policy on the Credit Bond Market 3.2.1 Impact Logic and Magnitude Calculation - After interest income from interest - rate bonds loses the VAT exemption advantage, the relative value of credit bonds increases. The spread between self - operating departments' credit bonds and other bonds narrows by about 10BP, and the relative value of credit bonds may increase by 5 - 15BP for self - operating departments and 3 - 10BP for asset management products and public funds [3][20]. - The credit spread of credit bonds compared to government bonds may decline due to the increase in the benchmark rate of newly - issued government bonds. The new policy may attract more funds from local government bonds and financial bonds to credit bonds, and the market sentiment after the policy implementation will affect the timing of credit bond allocation [3][21]. 3.2.2 Impact on Different Financial Institutions - For public funds, although the VAT rate on bond interest income rises to 3%, their investment advantage in bonds still exists and may attract more funds into the credit bond market, bringing trading volume to sub - categories of credit bonds [6][29]. - For self - operating departments, with the VAT rate rising to 6%, they may increase credit bond allocation through funds, and pay more attention to urban investment bonds and industrial bonds [6][29]. - For other asset management institutions, with the VAT rate rising to 3%, they may invest in public funds or private asset management products and slightly increase the proportion of credit bonds and inter - bank certificates of deposit [6][30]. 3.3 Impact of the New Bond VAT Policy on the Bank's Perpetual and Tier - 2 Bonds Market 3.3.1 Impact Logic and Magnitude Calculation - In the short - term, due to the tax - exemption advantage of existing bonds, the demand for bank perpetual and tier - 2 bonds in the secondary market will increase, and the yields of 5 - year tier - 2 capital bonds (AAA -) and 5 - year perpetual bonds (AAA -) will decline by 11.07BP and 11.44BP respectively. In the long - term, the policy may have little impact on bank perpetual and tier - 2 bonds [7][32]. 3.3.2 Impact on Different Financial Institutions - Public funds still have the motivation to allocate high - liquidity bank perpetual and tier - 2 bonds and can improve portfolio liquidity through credit bond ETFs [8][35]. - Self - operating departments may increase the allocation of bank perpetual and tier - 2 bonds and strengthen entrusted investment to reduce tax costs [8][35]. - Other asset management institutions may adopt a strategy of "shortening duration + exploring individual bonds" to deal with the tax policy change [8][36].

Core Viewpoint - The adjustment of the value-added tax (VAT) policy on interest income from newly issued government bonds, local bonds, and financial bonds starting from August 8 will impact the yield spread between new and old bonds, with various institutions providing different estimates on the magnitude of this effect [1][3]. Group 1: Tax Policy Impact - The VAT on interest income for newly issued government bonds, local bonds, and financial bonds is set at 6% for ordinary self-operated institutions and 3% for asset management products, including public funds [1]. - Bonds issued before August 8 will continue to be exempt from VAT until maturity [1]. Group 2: Yield Spread Analysis - Huatai Securities estimates that the yield spread between new and old bonds will fluctuate between 5 to 10 basis points (BP) [3]. - Guosheng Securities estimates the yield spread range at 5.6 to 10.8 BP, while招商证券 calculates an average impact of approximately 12 BP on the comprehensive yield difference between new and old bonds [3]. - Short-term demand for old bonds is expected to increase due to their tax exemption, leading to a decline in their yields [3]. Group 3: Market Dynamics - Tianfeng Securities outlines a three-phase process for the repricing of new and old bond spreads, starting with increased demand for old bonds due to tax advantages, followed by a liquidity discount for old bonds as their liquidity decreases, and finally, a narrowing of spreads as tax-exempt bonds mature [3]. - The adjustment in the tax policy is likely to lead banks to alter their investment strategies, potentially increasing allocations to credit bonds and public funds due to the comparative tax advantages [5]. Group 4: Bank Impact - Banks, which hold about 30% of the total market bonds, are expected to benefit from the short-term gains on old bonds due to their tax-exempt status [4]. - However, the tax cost for new investments in government and financial bonds is projected to increase by approximately 23.2 billion yuan in the next year [4]. - The overall impact on bank profits from the VAT policy is estimated to be around -2.0% on the asset side and -0.5% on the liability side, indicating a limited overall effect [4].

Core Viewpoint - The Ministry of Finance and the State Taxation Administration announced a tax policy adjustment on interest income from government bonds, local government bonds, and financial bonds, reinstating a 6% value-added tax (VAT) on new issuances starting August 8, 2025, while previously issued bonds remain exempt until maturity [1][2][3] Tax Policy Adjustment - The VAT rate for interest income on government bonds, local government bonds, and financial bonds has been raised from 0% to 6% [3] - The exemption for interest income on government bonds began in 1994, while local government bonds were exempted starting in 2009, and financial bonds were clarified in 2016 [3] - The adjustment adopts a "new and old separation" approach, maintaining tax benefits for bonds issued before August 8, 2025, while new financial bonds will be subject to VAT [3][4] Impact on Different Investor Types - Asset management institutions benefit from a reduced VAT rate of 3% on bond interest income, while self-operated institutions face a 6% VAT [4] - Public funds are exempt from VAT on bond trading profits, and individual investors earning less than 100,000 yuan per month are also exempt from VAT [4][5] Reasons for Adjustment - The adjustment aims to optimize the bond market structure, enhance risk control, and supplement fiscal revenue [7][8] - The bond market has matured, with a total scale reaching 174.93 trillion yuan, indicating that the previous tax incentives have fulfilled their purpose [8] - The adjustment is intended to alleviate the "asset shortage" phenomenon by redirecting funds from government bonds to credit bonds and equity markets [8][9] Market Impact - Short-term, the adjustment may create arbitrage opportunities for older bonds due to their tax-exempt status, while new bond issuance rates may rise [10][11] - The yield spread between new and old bonds could reach 5-10 basis points, with potential for increased returns on older bonds [10][11] - Long-term, the volatility from the tax exemption removal is expected to diminish, with a focus on the pricing of newly issued government bonds [12] Fiscal Revenue Implications - The adjustment is projected to generate over 200 billion yuan in additional tax revenue, with new bond issuances expected to exceed 500 billion yuan in ticket size for 2025 [9][12] - The increase in tax revenue is anticipated to support fiscal income, especially given the rising issuance of government and local government bonds [9][12]

Group 1: Macro Insights - The relative value of stocks compared to bonds has significantly improved, indicated by a ten-year divergence in the Sharpe ratio difference between stocks and bonds, suggesting a resurgence in the attractiveness of equities[2][13][17]. - Policy measures have provided a rare certainty that limits downside risks in the stock market, reducing volatility and drawdowns[2][14][19]. - Economic leading indicators have shown signs of bottoming out, with the corporate and household deposit scissors gap improving since September 2024, indicating a potential stabilization in profit growth[2][14][20]. Group 2: Market Trends - The bull market is expected to continue, transitioning from financial re-inflation to real asset re-inflation, with a focus on structural optimization rather than total expansion[3][24]. - New trends above 3500 points include accelerated inflow of incremental funds, with margin trading and active equity funds driving significant volume increases, reaching an average daily turnover of 1.6 trillion CNY in July[3][25]. - The market is witnessing a shift towards mid-cap growth stocks, with a notable increase in earnings per share (EPS) revisions, indicating a recovery in corporate performance expectations[3][27]. Group 3: Fixed Income Adjustments - The recent adjustment in the value-added tax (VAT) on bond interest income is expected to create a favorable environment for older bonds, leading to a decrease in yields and a return of alpha spread value in the bond market[4][29][32]. - The long-term impact of the VAT changes will depend on the issuance of new government bonds and the market's response to these adjustments, with expectations of a potential upward shift in the yield curve[4][32][33]. Group 4: U.S. Federal Reserve Signals - The July Federal Reserve meeting maintained the federal funds rate at 4.25%-4.5%, with indications that inflation risks outweigh employment risks, suggesting a cautious approach to future rate cuts[5][34][35]. - The Fed's stance reflects a focus on managing inflationary pressures while acknowledging the uncertainties surrounding economic growth, particularly in light of tariff impacts on consumer prices[5][34][36].

Economic Indicators - The weekly ECI supply index is at 50.07%, down 0.03 percentage points from last week, while the demand index is at 49.92%, down 0.01 percentage points[6] - The monthly ECI supply index for July is at 50.11%, down 0.05 percentage points from June, and the demand index is at 49.92%, down 0.01 percentage points[7] - In July, the sales area of commercial housing in 30 major cities recorded 6.49 million square meters, a year-on-year decline of 18.6%, widening from June's 8.4%[6] Bond Market and Tax Adjustments - The ELI index as of August 3, 2025, is -0.72%, up 0.09 percentage points from last week, indicating a slight recovery in liquidity for the real economy[10] - The adjustment of the bond value-added tax may lead to increased allocation of funds to non-financial corporate bonds and other real economy assets[12] - The People's Bank of China plans to expand the issuance of technology innovation bonds, which may compress the yield spread of direct financing tools for the real economy[12] Industrial Production and Consumption - The operating rate for full steel tires is 61.08%, down 3.94 percentage points from the previous week, while the operating rate for semi-steel tires is 74.45%, down 1.42 percentage points[15] - The average daily sales of passenger cars for the week ending July 27 is 66,611 units, a year-on-year increase of 1,244 units, with total retail sales for July at 1.445 million units, up 9.0% year-on-year[20] Export and Inflation Trends - The export container freight index for Shanghai is at 1,550.74 points, down 41.85 points from the previous week, indicating a decline in export shipping costs[31] - The average wholesale price of pork is 20.55 yuan/kg, down 0.17 yuan/kg from the previous week, while the price of 28 monitored vegetables is 4.42 yuan/kg, up 0.03 yuan/kg[36]