Report Information - Report Date: December 28, 2025 [1] - Analysts: Yan Ziqi, Hong Ziyan [2] - Report Title: Bond Research Weekly: Insurance Funds Rush to Allocate 30-Year Treasury Bonds [2] Report Core Issues - Recent bond market performance review [5] - Recent institutional behavior changes [5] - Outlook for the subsequent bond market [5] Investment Highlights - The recent bond market has been volatile, with the 10-year Treasury bond yield hovering around 1.83%. The loose funding situation is notable at the end of the year, with funding rates remaining low and interbank lending volume above 5 trillion yuan [6][11] - In the short term, the 30Y - 10Y term spread may stabilize. Insurance institutions have significantly increased their bond purchases in the secondary market in the past two weeks, becoming the largest buyers of 30-year Treasury bonds and stabilizing their performance [6][11] - This phenomenon may be related to the "Insurance Company Asset - Liability Management Measures (Draft for Comment)", and it is also possible that insurance institutions are optimizing liquidity indicators at the end of the year. Attention should be paid to whether they become net sellers after the New Year [6][11] - In terms of trading structure, large banks mainly bought 10-year and shorter Treasury bonds, joint-stock banks took profits, securities firms mainly bought 5 - 10Y Treasury bonds, and public funds preferred 10Y China Development Bank bonds without significantly chasing 30-year Treasury bonds at the end of the year [6][12] - As of December 26, the median duration of medium - and long - term bond funds (including leverage) was 2.67 years, showing no significant change from December 22 [6][12] Section Summaries 1. This Week's Bond Market Review - The bond market was volatile, with the 10-year Treasury bond yield around 1.83%. The funding situation was loose, with rates low and interbank lending volume above 5 trillion yuan [11] - Insurance institutions increased bond purchases, becoming the largest buyers of 30-year Treasury bonds, which may be due to regulatory requirements and year - end optimization of indicators [11] 2. Bond Yield Curve Tracking 2.1 Key Maturity Interest Rates and Spreads - As of December 26, compared with December 22, the 1Y Treasury yield dropped 6.75bp to 1.29%, the 10Y dropped 0.39bp to 1.84%, and the 30Y dropped 1.79bp to 2.22% [13] - The 30Y - 10Y spread decreased 1.40bp to 38.57bp, and the 10Y CDB - 10Y Treasury spread increased 0.34bp to 14.41bp [13] 2.2 Treasury Bond Term Spreads - As of December 26, compared with December 22, the 3Y - 1Y spread rose 3.51bp to 7.55bp, the 5Y - 3Y rose 1.89bp to 23.21bp, etc. [16] 3. Bond Market Leverage and Funding Situation 3.1 Interbank Pledged Repurchase Balance - As of December 26, the balance rose 0.22 trillion yuan to 12.96 trillion yuan compared with December 22 [19] 3.2 Interbank Bond Market Leverage Ratio - As of December 26, the ratio increased 0.15pct to 107.79% compared with December 22 [22] 3.3 Pledged Repurchase Turnover - From December 22 to 26, the average daily turnover was 8.49 trillion yuan, with overnight turnover averaging about 7.49 trillion yuan and an overnight turnover ratio of 88.28% [25][26] 3.4 Interbank Funding Situation - From December 22 to 26, bank lending increased. As of December 26, large and policy banks' net lending was 4.91 trillion yuan, and joint - stock, city, and rural commercial banks' net lending was 0.58 trillion yuan [28] - As of December 26, DR001 was 1.2556%, DR007 was 1.5237%, R001 was 1.3450%, and R007 was 1.5264% [28] 4. Medium - and Long - Term Bond Fund Durations 4.1 Median Duration of Bond Funds - As of December 26, the median duration of medium - and long - term bond funds was 2.59 years (de - leveraged) and 2.67 years (including leverage), showing no change from December 22 [40] 4.2 Median Duration of Interest - Rate Bond Funds - As of December 26, the median duration of interest - rate bond funds (including leverage) was 3.72 years, down 0.01 year from December 22, and that of credit bond funds was 2.41 years, down 0.01 year [43] 5. Bond Lending Balance Changes - As of December 26, compared with December 22, the borrowing volume of 10Y CDB bonds fluctuated [47]

Core Viewpoint - The bond market has experienced significant volatility since July, with rising yields and a clear downward trend, influenced by the upward movement in equity and commodity markets [1][2] Group 1: Market Trends - The 10-year government bond yield has risen over 5 basis points, while the 30-year yield has increased by more than 8 basis points, surpassing 1.9% [1] - The bond market adjustment is attributed to the strong performance of equity and commodity markets, driven by supportive fiscal and monetary policies [1] - The yield spread between 10-year and 1-year government bonds remains at a historical low of 20 basis points, indicating a crowded and fragile trading structure [1] Group 2: Economic Outlook - The macroeconomic fundamentals of the bond market remain stable, with structural issues in the Chinese economy still needing resolution [2] - The real estate market is stabilizing, but the overall economic growth rate is declining, suggesting a prolonged period of asset scarcity [2] - The expectation of continued accommodative monetary policy, including potential rate cuts, supports the bond market's fundamentals [2] Group 3: Investment Considerations - The dividend yield of the CSI All Share Index has dropped to around 2%, narrowing the gap with the 10-year government bond yield, which enhances the attractiveness of bonds [2] - The estimated reasonable pricing for the 10-year government bond is between 1.8% and 1.9%, based on the anticipated spread with policy rates [2] - A breakthrough above the 1.9% yield level may require effective demand-side stimulus policies to be implemented [2]

Core Viewpoint - The continuous growth of bond ETFs, with total scale surpassing 260 billion yuan, reflects both market conditions and changing investor demands, indicating their increasing importance in asset allocation and capital market development [1][3][6]. Group 1: Bond ETF Growth - The total scale of bond ETFs has reached 262.47 billion yuan as of May 19, 2024, marking an increase of approximately 88.5 billion yuan compared to the end of 2023 [3]. - Eight new bond ETFs launched in 2024 have raised a total of 21.71 billion yuan, with their total management scale doubling to 44.08 billion yuan [5]. - Existing bond ETFs have also seen significant net inflows, with notable increases in fund shares for specific ETFs like the FuGuo 7-10 Year Policy Financial Bond ETF and the PengYang 30-Year Treasury ETF [5]. Group 2: Market Drivers - The growth in bond ETF scale is attributed to multiple factors, including the ongoing bull market in bonds, declining yields on 10-year government bonds, and a supportive policy environment [6][10]. - The demand for low transaction costs and high trading efficiency has made bond ETFs a preferred choice for investors looking to allocate assets conveniently [3][9]. Group 3: Future Outlook - The bond ETF market is expected to continue expanding due to increasing demand from pension and social security funds, as well as the growing interest from foreign investors [9][10]. - Regulatory support for ETF product diversification and the introduction of measures to enhance market liquidity are anticipated to further boost the bond ETF market [10]. Group 4: Market Dynamics - The bond market is currently experiencing structural volatility, influenced by macroeconomic factors and policy expectations, which may affect the performance of bond ETFs [12][14]. - The complexity of the macroeconomic recovery and the interplay of supply and demand dynamics are contributing to fluctuations in the bond market [14].