While current macro conditions across the globe make many economic outlooks a bit more murky, one thing remains relatively clear: It may be a very good time to be investing in bonds. Here's why. ...

Core Viewpoint - Shanghai Bank is focusing on enhancing its bond investment strategies and public loan issuance plans to navigate market fluctuations and achieve sustainable growth in revenue streams [2][3]. Group 1: Bond Investment Strategy - The bank acknowledges that fluctuations in the bond market can impact its revenue, emphasizing the need for effective rotation of its three main income sources: net interest income, intermediary business income, and other non-interest income [2]. - Shanghai Bank's bond investment strategy includes: 1. Serving the real economy by optimizing asset allocation and enhancing comprehensive services for corporate clients [2]. 2. Diversifying strategies to capitalize on the acceleration of RMB internationalization and expanding offshore asset investments [2]. 3. Maintaining core trading value contributions and improving active trading capabilities [2]. 4. Balancing risk and return by controlling portfolio duration to mitigate interest rate fluctuation risks [2]. Group 2: Public Loan Issuance Plans - The bank aims to achieve a "double uplift" in key areas and sectors by enhancing its service capabilities in targeted fields [3]. - Key initiatives include: 1. Developing a specialized financial service system for technology-driven enterprises, focusing on early-stage and small-scale businesses [3]. 2. Expanding inclusive financial services for small and micro enterprises, particularly in automotive and supply chain finance [3]. 3. Accelerating the establishment of green finance initiatives, targeting high-quality clients in green industries [3][4]. Group 3: Convertible Bonds - The bank is progressing with its convertible bond strategy as a means to supplement its core Tier 1 capital, having issued 20 billion yuan in convertible bonds in January 2021, maturing in January 2027 [5]. - The bank's stock price is currently above the conversion price of the convertible bonds, and it plans to enhance its market value management and operational efficiency to facilitate the conversion process [5].

Summary of Key Points from Conference Call Industry Overview - The conference call discusses the offshore bond market, specifically focusing on Chinese dollar bonds and dim sum bonds, highlighting their differences in issuer and investor scope, custody, and listing locations [1][2]. Core Insights and Arguments - **Types of Offshore Bonds**: Common types include Chinese dollar bonds, dim sum bonds, Yulan bonds, and Lianhua bonds, with Chinese dollar bonds and dim sum bonds having the broadest issuer and investor participation [2]. - **Issuance Characteristics**: Offshore bonds typically have longer maturities, primarily over one year, with common terms of 3, 5, and 10 years. High-rated issuers can issue bonds with maturities of 30-50 years [1][4]. - **Regulatory Requirements**: Issuers must obtain approval from the National Development and Reform Commission (NDRC) and report on the use of funds, which cannot be used for new local hidden debts or speculative activities [1][4][6]. - **Market Dynamics**: The Chinese dollar bond market has shifted towards refinancing due to rising financing costs from U.S. Federal Reserve interest rate hikes and defaults in the real estate sector. The market is currently characterized by a net outflow of financial quality [3][23]. - **Dim Sum Bond Market Growth**: The dim sum bond market has expanded, benefiting from low financing costs in RMB and the opening of the Southbound Trading Link. However, growth has stabilized since 2025 [3][27]. - **Investor Composition**: The primary investors in Chinese dollar bonds are asset management institutions in Asia, with domestic institutions participating through Qualified Domestic Institutional Investor (QDII) and Renminbi Qualified Domestic Institutional Investor (RQDII) schemes [18][19]. Important but Overlooked Content - **Investment Strategies**: Strategies for investing in offshore bonds should consider the nature of funds, exchange rate risks, and potential arbitrage opportunities through curve trading and pricing discrepancies between domestic and international markets [34][35][38]. - **Market Trends**: The Chinese dollar bond market has seen a decline in real estate sector participation, while the proportion of city investment enterprises has significantly increased since 2022 [24][25]. - **Regulatory Changes**: Recent changes in regulatory frameworks have shifted from a filing system to an approval system for foreign currency loans, impacting the issuance process and timelines [6][9]. - **Default Management**: The complexity of managing defaults in offshore bonds arises from diverse issuance structures and varying legal systems, complicating recovery processes [44][50]. This summary encapsulates the key points discussed in the conference call, providing insights into the offshore bond market's structure, dynamics, and investment strategies.

Group 1 - The report suggests that in the current weak bond market, maintaining a bullet-type portfolio may lead to instability in liabilities, while adopting a trading strategy could enhance returns despite limited execution time and space [1][6][35] - It is recommended to focus on whether interest rates are oversold and if there is a short-term downward adjustment opportunity, as the probability of significant upward movement in interest rates remains low [1][6][35] - The current high level of the futures long-short ratio indicates that short-selling pressure is weak, suggesting that prices are not oversold, with the average cost of 10-year government bonds held by funds around 1.8% [2][7][17] Group 2 - The report emphasizes that if market sentiment reverses and interest rates decline smoothly, a shift back to a buy-on-dips strategy could be considered, although this requires specific events such as a central bank rate cut [2][3][36] - Investors are advised to focus on active long-term interest rate bonds, with expected volatility for 10-year government bonds in the range of 1.7-1.8% [2][3][36] - The report highlights the importance of selecting bonds based on the yield curve and value, recommending specific bonds such as 25T6 for long-term interest rate bonds and 240208 for medium-term bonds [12][9][10] Group 3 - In the context of credit bonds, the report notes that while the funding environment remains loose, attention should be gradually shifted away from medium to long-term credit bonds due to potential funding fluctuations in the upcoming months [3][12] - The report indicates that the performance of TF and T contracts has been relatively better than cash bonds, with the TL main contract being cheaper [3][13] - The report provides a weekly review of the bond market, noting a slight decline in overall interest rates, with short-term bonds performing better under the current conditions [14][15][16]

Report Industry Investment Rating No information about the report industry investment rating is provided in the content. Core Viewpoints - Since the implementation of the new policy, the issuance of science and technology innovation bonds has shown new changes, including broader financing channels, lower financing costs, optimized term structure, and enhanced credit enhancement mechanisms [1][9][11][14][18][19]. - There are investment opportunities in non - component securities of brokerage science and technology innovation bonds, and institutions with stable liability ends can consider perpetual science and technology innovation bonds. Institutions can also seize the valuation decline opportunity of newly - listed science and technology innovation bonds after one month, and pay attention to non - component securities while exploring the income opportunities of component securities [2][3]. - In the short term, the science and technology innovation bond market is expected to be demand - driven, and the narrowing spread market is expected to continue, but the space is relatively limited [28]. Summary According to the Directory 1. New Changes in the Issuance of Science and Technology Innovation Bonds Since the New Policy - **Financing Channels and Issuer Structure**: In May - July 2025, the number and scale of newly - issued science and technology innovation bonds reached monthly highs in recent years. The proportion of central and state - owned enterprise science and technology innovation bonds decreased, while that of private enterprise science and technology innovation bonds increased, indicating optimized issuer structure and enhanced financing availability for private enterprises [11]. - **Financing Cost**: The financing cost of science and technology innovation enterprises has decreased, with the weighted average coupon rate dropping from 2.03% - 2.47% in January - April 2025 to 1.77% - 1.89% in May - June. The policy of the central bank to purchase science and technology innovation bonds with low - cost re - loan funds is expected to keep the financing cost low in the long term [14]. - **Term Structure**: The term structure of science and technology innovation bonds has been optimized, with the proportion of bonds with a term of less than 1 year decreasing from 29% to 18.28%, and the proportion of 3 - year and 5 - year bonds increasing by 8.48 and 1.31 percentage points respectively [18]. - **Credit Enhancement Mechanism**: The proportion of science and technology innovation bonds with guarantee measures has increased from 5.87% to 6.27% after the new policy. Policy guidance and the application of innovative credit enhancement tools have enhanced the credit enhancement mechanism [19][20]. 2. Thoughts on Science and Technology Innovation Bonds - **Brokerage Science and Technology Innovation Bonds**: As of August 12, among the 46 brokerage science and technology innovation bonds issued since May, 34 were included in the index component securities and 28 in the science and technology innovation bond ETF component securities. Un - included brokerage science and technology innovation bonds may be included later, presenting investment opportunities [2][22]. - **Perpetual Science and Technology Innovation Bonds**: Among the 606 component securities of 10 science and technology innovation bond ETFs, only 89 are perpetual bonds, accounting for 14.69%. There is a large gap compared with the tracking index, and there may be expansion demand for ETF products, especially those with low duration [2][24]. - **Investment Opportunities in Newly - listed Bonds**: Newly - listed science and technology innovation bonds have an obvious primary - secondary spread inversion phenomenon, which reduces after one month. Institutions bidding for new bonds in the primary market can seize the valuation decline opportunity, while institutions with unstable liability ends can focus on the secondary market [3][25]. - **Non - component Securities**: - Select non - component securities with a duration matching the three major science and technology innovation bond indices (2 - 3Y, 4 - 5Y), preferably from those meeting the market - making standards [3][30]. - Pay attention to multi - labeled science and technology innovation bonds, which have greater valuation compression opportunities under multiple policy attributes [4][31]. - Institutions with high risk appetite can pre - layout high - growth small and medium - sized science and technology innovation enterprises with outstanding bonds, as the new rating system is expected to improve their credit ratings and valuations [4][32].

Summary of Conference Call Records Industry Overview - The records primarily discuss the bond market, particularly focusing on local government bonds and the impact of VAT adjustments on pricing and investment strategies [1][2][4]. Key Points and Arguments 1. **Bond Market Dynamics** - Local government bond yields are converging, with a notable focus on older bonds that have higher coupons and better liquidity. New code bonds need to be reassessed for relative and absolute returns [1][3]. 2. **Impact of VAT on Bond Pricing** - Following the reintroduction of VAT, the pricing of bonds has shown a convergence in volatility. For instance, the yield range for 10-year government bonds has decreased from 1.70-1.75% to 1.68-1.72%, indicating a market in a waiting phase [2][7]. 3. **New Code Bonds Performance** - New code local government bonds are actively issued, with yields averaging 5 basis points higher than old code bonds. The pricing reflects a 3% VAT, primarily driven by proprietary trading desks, indicating a balance in tax burden sharing [4][6]. 4. **Liquidity and Spread Changes** - Both new and old local government bonds exhibit high liquidity, leading to a narrowing of spreads. The 30-year and 10-year government bonds are highlighted as having significant investment value due to their high spread positions [5][6]. 5. **Real Estate Market Insights** - The recent easing of real estate purchase restrictions in Beijing does not signal a new relaxation cycle. Existing policies are near their limits, and significant recovery in the real estate market is unlikely until 2026, requiring additional policy measures [6][7]. 6. **Inflation and Economic Stimulus** - Inflation recovery is expected to take time, with commodity prices reflecting more elasticity in futures rather than spot markets. Structural economic stimulus measures are deemed necessary for long-term stability [1][6]. 7. **Central Bank's Cautious Approach** - The central bank has shown caution in liquidity provision, with recent operations indicating a careful approach to market dynamics. The probability of funding rates dropping below 1.2% is considered low, reflecting a stable yet cautious monetary policy stance [2][7]. Other Important Insights - The market's risk appetite is diminishing, with a shift in focus from risk assets to bond market dynamics. The correlation between stock markets and bond markets has weakened, indicating a more cautious investment environment [2][3]. - The competition for older bonds is categorized into three types based on their issuance time, coupon rates, and liquidity, highlighting the strategic adjustments needed in investment approaches [3][4].

1. Report Industry Investment Rating There is no information provided regarding the report's industry investment rating. 2. Core Viewpoints of the Report - In Q2 2025, the bond market environment was more favorable than in Q1. After the relaxation of funds, some bond varieties returned to a "positive carry" state, leading to an increased willingness among bond funds to add leverage, actively extend durations, and explore credit spreads, resulting in a rise in bond market congestion. The scale of money market funds reached a new high, and after the funds were relaxed, the risk of negative deviation significantly decreased. The product allocation preference shifted from fund lending to bank deposits [3][5]. - Looking ahead, due to factors such as the upcoming approval of policy - based financial instruments, continuous risk - preference disturbances, and insufficient expectations of interest rate cuts, bond market trading will enter a "hard mode". The 10 - year Treasury bond yield may rise slightly to a core fluctuation range of 1.65 - 1.75%. It is advisable to conduct bond swaps and take profits when market sentiment improves. In addition, although the market is relatively friendly in early August, there are still disturbances from factors such as expectations of broad - credit policies and risk preferences. During bond market adjustments, a fund redemption wave may be triggered, further amplifying market volatility. Institutions should maintain account liquidity and seize small - band trading opportunities [4][166]. 3. Summary by Relevant Catalogs 3.1 Bond Funds: Risk - Aversion Sentiment Drives Bond Market Recovery, Bond Fund Scale Resumes Expansion, and Performance Turns Positive 3.1.1 Asset Scale - In Q2 2025, the overall bond fund scale increased by 861.5 billion yuan. As of the end of Q2, there were 3,862 bond funds, accounting for 29.92% of all funds. The net issuance was 54 funds, and the asset net value increased to 10.93 trillion yuan. The share of bond funds mainly increased in pure - bond funds, while the share of convertible bond funds decreased slightly. Among them, passive index bond funds had the most significant scale increase, supported by the expansion of market - making credit bond ETFs [11][15][17]. 3.1.2 Subscription and Redemption - The redemption pressure on pure - bond funds in Q2 was significantly relieved compared to Q1. The net subscription ratio of short - term bond funds rebounded to 56.52%, the highest among all bond funds. The subscription sentiment of "fixed - income +" bond funds was weaker than that of pure - bond funds. The net subscription ratios of mixed first - tier and second - tier bond funds decreased, and the median net subscription - redemption rates also declined [31][35]. 3.1.3 Performance - The annualized return of bond funds in Q2 2025 increased to 4.10%. "Fixed - income +" bond funds performed better than pure - bond funds. The performance ranking was second - tier bond funds (5.21%) > first - tier bond funds (4.63%) > medium - and long - term pure - bond funds (3.82%) > passive index bond funds (3.63%) > short - term pure - bond funds (2.55%) [36]. 3.1.4 Leverage Ratio - In Q2 2025, due to the central bank's reserve requirement ratio and interest rate cuts, the funds' price center decreased, and some varieties returned to a "positive carry" state. The overall leverage ratio of bond funds increased by 1.29 percentage points to around 119.94%, and the leverage ratios of various types of bond funds also increased [43]. 3.1.5 Weighted Average Duration of Top - 5 Heavy - Position Bonds - In Q2 2025, after the rapid decline in bond market yields, institutions generally extended durations to seek returns. The weighted average duration of the top - 5 heavy - position bonds of existing bond funds increased by 0.69 years to 3.44 years. The durations of all types of funds increased [46][47]. 3.1.6 Asset Allocation - **Large - scale Asset Allocation**: In Q2 2025, bond funds mainly increased their bond holdings by 1.14 trillion yuan, with the proportion of bonds increasing to 96.51%. The proportions of stocks, bank deposits, and other assets decreased [62]. - **Bond Category Asset Allocation**: The proportion of credit bonds held by bond funds increased by 0.97 percentage points to 49.13%, while the proportion of interest - rate bonds decreased by 0.84 percentage points to 44.04% [88]. - **Rating Changes of Heavy - Position Bonds**: Overall, the bond funds' holdings of urban investment bonds and industrial bonds showed an obvious trend of concentration towards AAA - rated bonds. Pure - bond funds focused more on liquidity management, with both urban investment bonds and industrial bonds concentrating on AAA - rated bonds. "Fixed - income +" funds had more obvious credit - sinking, with an increased proportion of AA - rated and below bonds [106][107]. 3.2 Money Market Funds: "Deposit Migration" Drives Scale to a New High, and Allocation Demand Shifts to Deposits and Certificates of Deposit 3.2.1 Traditional Money Market Funds - **Asset Scale**: At the end of Q2 2025, the number of traditional money market funds remained at 364, and the scale exceeded 14 trillion yuan, an increase of 904.6 billion yuan from the previous quarter, a 6.8% increase [121]. - **Subscription and Redemption**: In Q2 2025, 52.47% of money market funds had net subscriptions. Both the retail and institutional ends had net subscriptions [127][130]. - **Performance**: The average 7 - day annualized yield of money market funds in Q2 was 1.26%, a decrease of 0.09 percentage points from Q1. The yields of Yu'E Bao and WeChat Licaitong fluctuated at a low level of 1.2 - 1.4% [136]. - **Leverage Ratio and Duration**: In Q2 2025, the average leverage ratio of money market funds increased by 1.82 percentage points to 105.78%, and the average remaining maturity increased by 7.05 days to 82.72 days [137]. - **Deviation**: In Q2 2025, the absolute - value average of money market fund deviations was basically the same as in Q1, but the number of funds with a minimum negative deviation decreased significantly [141]. - **Asset Allocation**: In terms of large - scale asset allocation, money market funds reduced fund lending and mainly increased bank deposit holdings. In terms of bond category asset allocation, they mainly increased their holdings of certificates of deposit [144][148]. 3.2.2 Floating - Net - Value Money Market Funds - In Q2 2025, the scale of floating - net - value money market funds decreased slightly. The average leverage ratio decreased to 101.54%, and the average remaining maturity decreased to 39.33 days. In terms of asset allocation, they mainly reduced bond and fund - lending holdings and increased bank deposit holdings. In terms of bond asset allocation, they mainly reduced their holdings of certificates of deposit. The yield performance was better than that of traditional money market funds [153][156]. 3.3 Main Conclusions - In Q2 2025, bond funds actively added leverage, extended durations, and explored credit varieties. Money market funds also added leverage, extended durations, and shifted their asset - allocation preferences from fund lending to bank deposits [164][165].

Core Viewpoint - The Ministry of Finance and the State Taxation Administration announced the restoration of VAT on interest income from newly issued government bonds, local government bonds, and financial bonds starting from August 8, 2025, while existing bonds will remain exempt until maturity [1] Market Reaction - The announcement led to an immediate spike in bond yields due to increased holding costs for new bonds, followed by a rapid reversal as existing bonds became more attractive due to their tax-exempt status, resulting in a significant drop in yields [1] - The market experienced volatility as traders quickly shifted strategies, indicating a rapid change in sentiment [1] Institutional Insights - Institutions believe the tax adjustment will have a medium to short-term impact on the bond market, with a potential widening of the yield spread between new and existing bonds, leading to a buying spree for existing bonds [2][4] - The structural advantage of existing bonds over new issues is expected to influence investor behavior, with a preference for older bonds due to their tax benefits [2][3] Investment Strategy Adjustments - Fund companies are adjusting redemption limits for bond funds in response to the new tax policy, indicating a proactive approach to manage potential market fluctuations [4] - Institutions are exploring alternative investment strategies, including a shift towards credit bonds, REITs, and equities, as the attractiveness of newly issued bonds diminishes [5][7] Tax Implications - The new tax policy primarily affects interest income, while public funds retain their tax advantages on capital gains, potentially increasing demand for public funds over bank proprietary products [6] - The tax changes are expected to have a limited impact on the overall asset allocation of banks and insurance companies, which continue to view government bonds as essential components of their portfolios [7][8]

Group 1 - The fund aims for long-term stable appreciation of assets while strictly controlling risks through reasonable allocation of equity and debt [2][3] - The fund's investment strategy involves dynamic asset allocation based on macroeconomic analysis and market conditions, focusing on high liquidity investments during the open period [2][3] - The fund's performance benchmark is set at 90% of the China Bond Credit Bond Total Wealth Index return and 10% of the CSI 300 Index return [4] Group 2 - As of the end of the reporting period, the total fund shares amounted to 1,536,261,029.89 shares [2][6] - The fund's net value growth rate for the past three months was 1.20%, while the benchmark return was 1.08% [12] - The fund's asset allocation included 88.32% in bonds and 11.12% in asset-backed securities, with no holdings in stocks [13][14] Group 3 - The fund manager has been managing the fund since November 3, 2023, with a focus on fixed income [8] - The fund has maintained compliance with relevant laws and regulations, ensuring fair treatment of all investors [10][11] - The fund's investment decisions are based on a thorough analysis of the financial and operational status of the issuers of the securities held [15]

Group 1 - The fund is managed by Galaxy Fund Management Co., Ltd. and is a three-month open-end bond fund aimed at achieving long-term returns exceeding the performance benchmark while controlling net asset value volatility [2][8]. - As of the end of the reporting period, the total fund shares amounted to 1,460,912,751.60 shares [2][25]. - The fund's investment strategy includes duration deviation, yield curve strategies, and credit risk assessment based on macroeconomic indicators and monetary policy [3][4][5]. Group 2 - The fund's performance benchmark is the China Bond Comprehensive Price Index yield [6][12]. - The fund's net value growth rate for the reporting period was 1.03%, while the benchmark yield was 1.06% [23]. - The fund's investment portfolio is primarily composed of bonds, with 99.72% of total assets allocated to this category [24]. Group 3 - The fund's management emphasizes risk management and compliance with relevant laws and regulations, aiming for the preservation and appreciation of fund assets [17][19]. - The fund manager has a history of experience in the securities industry, with the current fund manager having 11 years of experience [13][16]. - The fund has not held any stocks during the reporting period, focusing solely on bond investments [24].