Report Industry Investment Rating No information provided. Core Viewpoints - In Q3 2025, the total asset net value of the four types of bond funds decreased by 252.7 billion yuan compared to the previous quarter, with a significant reduction in pure bond funds and an increase in secondary bond funds [1][8]. - The bond positions of the four types of bond funds decreased, while the stock positions increased slightly. The four types of bond funds significantly reduced their bond holdings in Q3 after increasing them in Q2 [2][17]. - In Q3, bond funds generally reduced leverage and shortened duration due to the weakening bond market and rising interest rates [3][24]. - All four types of bond funds significantly reduced their holdings of credit bonds and interest - rate bonds. The proportion of interest - rate bonds in medium - and long - term pure bond funds decreased, and short - term pure bond funds significantly reduced their credit bond holdings [3][32]. - In Q3, pure bond funds and hybrid first - and second - tier bond funds reduced their holdings of interest - rate bonds, financial bonds, and certificates of deposit, and increased their holdings of industrial bonds and urban investment bonds. The proportion of high - grade bonds in the heavy - position credit bonds of some bond funds changed [4][51]. Summary by Directory I. Bond Fund Scale Overall Decline, Pure Bond Fund Scale Decrease - In Q3 2025, the total asset net value of the four types of bond funds was 9 trillion yuan, a decrease of 252.7 billion yuan from the previous quarter. Medium - and long - term pure bond funds decreased by 546.3 billion yuan to 5.91 trillion yuan, and short - term pure bond funds decreased by 198.5 billion yuan to 945.3 billion yuan. First - tier bond funds decreased by 3.1 billion yuan to 847.1 billion yuan, and second - tier bond funds increased by 495.3 billion yuan to 1.3 trillion yuan [1][8]. II. Asset Structure: Bond Positions Decline - The four types of bond funds increased their bond holdings by 800.7 billion yuan in Q2 and significantly reduced them by 827 billion yuan in Q3. By the end of Q3, medium - and long - term pure bond funds, short - term pure bond funds, first - tier bond funds, and second - tier bond funds held bond market values of 6.88 trillion yuan, 1 trillion yuan, 923.5 billion yuan, and 1.17 trillion yuan respectively, with the first three reducing their holdings and the second - tier bond funds increasing their holdings compared to Q2. - The proportion of bond market value to total asset value of the four types of bond funds decreased in Q3 compared to Q2, while the proportion of stock market value to total asset value of first - tier and second - tier bond funds increased [2][17]. III. Bond Funds Reduce Leverage and Shorten Duration - In Q3 2025, due to the good performance of the capital market and the flow of funds from fixed - income products to the equity market, the arithmetic average leverage ratios of medium - and long - term pure bond funds, short - term pure bond funds, first - tier bond funds, and second - tier bond funds decreased compared to Q2. - With the upward - trending bond market yields in Q3, all types of bond funds reduced their duration exposure. The average durations of medium - and long - term interest - rate bond funds, medium - and long - term credit bond funds, short - term interest - rate bond funds, and short - term credit bond funds decreased compared to Q2 [3][24]. IV. Bond Type Portfolio: Both Credit Bonds and Interest - Rate Bonds Are Reduced - The four types of bond funds significantly reduced their holdings of credit bonds by 359.2 billion yuan and interest - rate bonds by 415.1 billion yuan. By the end of Q3 2025, medium - and long - term pure bond funds reduced their holdings of credit bonds and interest - rate bonds compared to Q2, with the proportion of credit bonds increasing and that of interest - rate bonds decreasing. Short - term pure bond funds also reduced their holdings of credit bonds and interest - rate bonds. - First - and second - tier bond funds also reduced their holdings of credit bonds and interest - rate bonds. In terms of different bond types, different types of bond funds had different reduction or increase trends [3][32]. V. Heavy - Position Bond Analysis: High - Grade Proportion Declines - In Q3 2025, pure bond funds and hybrid first - and second - tier bond funds reduced their holdings of interest - rate bonds, financial bonds, and certificates of deposit, and increased their holdings of industrial bonds and urban investment bonds. - Among the heavy - position credit bonds, the proportion of AAA - rated bonds in medium - and long - term pure bond funds and short - term pure bond funds decreased, while the proportion of AA + - rated bonds increased. In first - tier and second - tier bond funds, the proportion of AAA - rated bonds increased. - In terms of regional distribution of heavy - position urban investment bonds, the top four provinces or regions with the most holdings in Q3 were Zhejiang, Jiangsu, Hubei, and Hunan. Compared with Q2, Jiangsu increased its holdings, while Shandong, Anhui, Tianjin, and Jilin reduced their holdings [4][51][58].

Report Industry Investment Rating No relevant information provided. Core Viewpoints - From October 27 to October 31, 2025, the central bank made net injections through short - term reverse repurchases, and the MLF had a net injection of 200 billion yuan. The money market faced short - term fluctuations due to tax payment periods and month - end effects. From October 27 to November 2, 2025, the net payment scale of government bonds decreased, the yields of inter - bank certificates of deposit (CDs) declined overall, and the average leverage ratio in the inter - bank bond market decreased slightly. From November 3 to November 9, 2025, the expected net payment of government bonds was - 38.2 billion yuan, and the maturity scale of inter - bank CDs was about 376.9 billion yuan. On October 31, 2025, the median durations of medium - long - term and short - term interest - rate style pure bond funds increased by 0.66 years and 0.20 years respectively on a weekly basis [2]. Summary by Directory 1. Funds - In October, the total net injection of outright reverse repurchases and MLF was 600 billion yuan. The central bank announced the restart of treasury bond trading. From October 27 to October 31, 2025, the central bank's 7 - day reverse repurchase had a net injection of 120.08 billion yuan. In November, 100 billion yuan of outright reverse repurchases and 90 billion yuan of MLF will mature [4]. - Affected by tax payment periods and month - end factors, the money market had short - term and slight fluctuations, but it loosened significantly in the last two days of the month. From October 27 to October 31, 2025, the average values of DR001 and R001 increased by 7.4 and 7.7 basis points respectively compared with October 20 - 24, 2025 [5]. - The net payment scale of government bonds decreased. From October 27 to November 2, 2025, the net payment of government bonds was about 133.72 billion yuan, 80.5 billion yuan less than that of October 20 - 26, 2025. From November 3 to November 9, 2025, the expected net payment of government bonds was - 38.2 billion yuan [6]. 2. Inter - bank Certificates of Deposit - The yields of inter - bank CDs declined overall. As of October 31, 2025, the yields of 1M and 3M inter - bank CDs decreased by 9.0 and 3.5 basis points respectively compared with October 24, 2025, and the yield of 1Y inter - bank CDs decreased by 4.8 basis points [7]. - The net financing of inter - bank CDs remained positive. From October 27 to November 2, 2025, the net financing of inter - bank CDs was about 17.06 billion yuan. The maturity repayment of inter - bank CDs from November 3 to November 9, 2025, is expected to be 376.9 billion yuan. The maturity scale of inter - bank CDs in November is about 2.8 trillion yuan, significantly higher than that in October (1.8 trillion yuan) [7]. 3. Institutional Behavior - The average leverage ratio in the inter - bank bond market decreased slightly. From October 27 to October 31, 2025, the average leverage ratio in the inter - bank bond market was 107.36%, compared with 107.56% from October 20 to October 24, 2025 [8]. - Based on the calculation results, the durations of medium - long - term and short - term interest - rate pure bond funds increased marginally. On October 31, 2025, the median duration of medium - long - term interest - rate style pure bond funds increased by 0.66 years on a weekly basis and was at the 96.5% quantile since early 2022; the median duration of short - term interest - rate style pure bond funds increased by 0.20 years on a weekly basis and was at the 98.7% quantile since early 2022 [8].

Report Summary 1. Report Industry Investment Rating The report is bullish on the bond market, suggesting that the current bond market has prominent allocation value and recommends investing in 10Y China Development Bank bonds, 30Y Treasury bonds, and 5Y capital bonds. [2] 2. Core View of the Report Based on the Q3 2025 quarterly reports of bond funds, the report analyzes the changes in interest rate bond funds, including scale, asset allocation, and investment strategies. It points out that due to factors such as the significant rise in the stock market and regulatory rule impacts in Q3, the bond market deviated from the capital and economic fundamentals, leading to a decline in the quarterly returns of interest rate bond funds. Currently, the bond market has high allocation value, and the bond yields are expected to decline in a volatile manner. [2] 3. Summary by Related Content Changes in Interest Rate Bond Funds in Q3 2025 - **Scale and Asset Allocation**: As of Q3 2025, the total asset value of interest rate bond funds was 3.1 trillion yuan, a decrease of 0.44 trillion yuan from Q2 2025. The bond allocation ratio decreased, while the cash ratio increased slightly. [2] - **Heavy - Positioned Bonds**: Actively managed interest rate bond funds slightly increased their allocation to Treasury bonds and reduced their allocation to policy - financial bonds. Overall, they reduced their allocation to long - duration bonds, but actively managed funds significantly increased their allocation to Treasury bonds with a maturity of 1 year or less and continued to increase their allocation to 30 - year Treasury bonds. [2] - **Yield**: The average annualized yield of interest rate bond funds decreased from 3.96% in Q2 2025 to - 1.84% in Q3 2025. Credit bond funds had relatively stronger defensive capabilities. [2] Investment Strategy Changes in Q3 2025 In Q3, the bond market deviated from the capital and economic fundamentals. Due to the significant extension of the duration in Q2, the bond market adjustment in Q3 led to a sharp decline in the quarterly returns of interest rate bond funds. As a result, the duration was shortened, and the scale returned to the level of Q3 2024. [2] Investment Recommendations - **Market Outlook**: The bond market has prominent allocation value, and the bond yields are expected to decline in a volatile manner. The policy interest rate in Q4 may be cut by 10 - 20BP. [2] - **Investment Choices**: The top choices for bond market investment are 10Y China Development Bank bonds, 30Y Treasury bonds, and 5Y capital bonds. It is predicted that the yield of 10Y Treasury bonds will return to around 1.65%, the yield of 30Y Treasury bonds will reach 1.9%, and the yield of 5Y large - bank secondary capital bonds will reach 1.9%. [2]

Report Industry Investment Rating No information provided in the report. Core Viewpoints - The report selects medium - duration investment - grade bond funds with large scales as samples to analyze the duration views and allocation preferences of US bond funds. In the cash bond level, as of Q2 2025, the proportions of Treasury bonds, credit bonds, and MBS in US bond fund holdings are 28.5%, 26.4%, and 36.9% respectively. Since H2 2024, funds have been more cautious about duration allocation, and their under - allocation of duration and inflation concerns may jointly push up the term premium. [3] Summary by Relevant Catalogs 0 US Bond Fund Classification - There are various types of US bond funds, including investment - grade bond funds, high - yield bond funds, government bond funds, etc. Investment - grade bond funds have the largest asset size, reaching $248.52 billion, accounting for 46.6% of the total. [4] - The report selects 20 actively - managed bond funds with large scales and using the Bloomberg US Aggregate Index as the performance benchmark as samples, which helps to better understand the duration views and allocation preferences of bond funds. [6] PART1 Cash Bonds: Analyzing Bond Funds' Variety Preferences - **Overall Position Structure**: From the end of 2021 to 2023, bond funds increased their MBS holdings, compressed their credit bond holdings, and slightly reduced their Treasury bond, municipal bond, and cash holdings. As of Q2 this year, the proportions of Treasury bonds, credit bonds, and MBS in US bond fund holdings are 28.5%, 26.4%, and 36.9% respectively. [12] - **Advantages of MBS**: MBS has higher returns than Treasury bonds, lower volatility than credit bonds, low cycle sensitivity, and relatively good valuation. Since 2023, MBS has had better valuation than credit bonds. [13][16] - **Impact on Duration**: MBS has a shorter duration than Treasury bonds and credit bonds. The increase in MBS and ABS holdings has shortened the overall duration of bond fund cash bonds. [17] - **Credit Bond Allocation**: Bond funds mainly reduced their holdings of the industrial sector in credit bonds, while maintaining stable allocations in the financial and utility sectors. From 2022 - 2023, they significantly reduced their holdings of the cyclically - sensitive industrial sector. [22] - **Comparison with Benchmark**: Compared with the benchmark (Bloomberg US Aggregate Index), bond funds are overweight in MBS and finance, and underweight in Treasury bonds and the industrial sector. [23] PART2 Derivatives: Why Do Funds Hold Long Positions in Futures? - **Increase in Treasury Futures Holdings**: Since 2022, asset management companies have significantly increased their long positions in Treasury futures, mainly holding 2Y and 5Y Treasury futures contracts. [26][27] - **Categories of Treasury Futures**: There are multiple categories of US Treasury futures, with different contract amounts and delivery conditions. As of the end of August this year, the open - interest amounts of 2Y, 5Y, 10Y, etc. Treasury futures are different. [33] - **Proportion of Mutual Funds**: As of Q4 2023, mutual funds held about $500 billion in Treasury futures, accounting for nearly half of the Treasury futures holdings of asset management institutions. Since 2022, mutual funds have concentrated on increasing their long positions in 2Y and 5Y Treasury futures. [35] - **Reasons for Holding Long Positions**: Funds hold long positions in Treasury futures to supplement the duration gap at a lower cost, allowing them to reduce the holdings of illiquid long - duration old Treasury bonds and allocate more to higher - yielding MBS/ABS. They also use Treasury futures to add leverage, and are less involved in the repurchase market. [38][43] - **Impact on the Market**: The long - position demand for Treasury futures from funds and the Fed's QT have led to a decrease in the buying of Treasury cash bonds, resulting in negative net basis and attracting hedge funds to engage in basis trading. [50] PART3 Model: Measuring the Empirical Duration of Funds - **Measurement Method**: The report uses the daily returns of 20 selected funds and five independent variables (changes in 10Y US Treasury yield, MBS spread, investment - grade credit spread, 30 - 5Y term spread, and volatility) for rolling regression. The regression coefficient of the 10Y US Treasury yield change is regarded as the empirical duration of the fund, which measures the fund's interest - rate risk exposure. [53][54] - **Relationship with Interest Rates**: Before H1 2024, funds generally adopted a configuration - based approach. Since H2 2024, they have been more cautious about duration allocation, under - allocating duration, and following the trend. Their under - allocation of duration may push up the term premium. [59][61] - **Allocation Preferences in Different Periods**: From 2022 - 2025, funds' allocation preferences changed with inflation, policy interest rates, economic fundamentals, and external shocks. For example, from 2022 - Feb 2023, they were overweight in credit and duration; from Mar - Jul 2023, they steepened the curve, under - allocated credit, and increased MBS allocations. [66][67] - **Asset Allocation Rules**: In the long - term, fund duration is generally positively correlated with interest rates. When the benchmark interest rate is low and credit spreads are relatively high, funds tend to increase credit exposure. When MBS is more attractively valued than credit bonds, funds tend to increase MBS allocations. [69][73][76]

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints - The bond market's vitality index significantly declined, and the bond market is facing the test of trading - disk selling pressure again. The selling pressure from funds was released again in the second half of the week, while large - scale banks increased their net buying of long - end interest - rate bonds, and their sustainability and stabilizing effect need further observation. - Most interest and credit bond funds have recorded negative returns in the past three months, the growth rate of bond fund scale in September is still lower than that of equity funds, and the issuance share of newly established bond funds has declined this week [5][95]. 3. Summary by Directory 3.1 Overall Sentiment - The bond market vitality index dropped significantly. As of September 26, it decreased by 17 pcts to 0% compared with September 19, and the 5D - MA decreased by 5 pcts to 16%. There were no warming indicators, and the cooling indicators included the implied tax rate of the 10 - year CDB bond, the trading volume of the active 10Y CDB bond / the balance of 9 - 10Y CDB bonds, the excess level of the inter - bank bond market leverage ratio compared with the average of the past 4 years, the median duration of medium - and long - term pure bond funds, and the turnover rate of the 30Y treasury bond [1][10][12]. 3.2 Institutional Behavior 3.2.1 Buying and Selling Strength and Bond Selection - The net buying strength ranking in the current bond market this week is: money market funds > large - scale banks > insurance > wealth management > other product types > others; the net selling strength ranking is: city commercial banks > rural financial institutions > securities firms > funds > joint - stock banks > foreign - funded banks. For ultra - long bonds, the net buying strength ranking is: insurance > securities firms > wealth management > other product types > others, and the net selling strength ranking is: large - scale banks > funds > city commercial banks > joint - stock banks > rural commercial banks > foreign - funded banks [19]. - The main bond types of various institutions are: large - scale banks focus on 1 - 3Y and 7 - 10Y interest - rate bonds; rural commercial banks focus on 3 - 5Y credit bonds; insurance focuses on interest - rate bonds and other bonds over 10Y; funds focus on interest - rate bonds within 1Y; wealth management focuses on interest - rate bonds within 1Y and 3 - 5Y credit bonds; other product types focus on 7 - 10Y interest - rate bonds [2][22]. 3.2.2 Trading Disk - The median duration of all - sample medium - and long - term pure bond funds decreased by 0.01 years compared with September 19. Among them, the median durations of pure interest - rate bond funds, interest - rate bond funds, and credit bond funds changed by - 0.02 years, - 0.07 years, and + 0.03 years to 5.15 years, 4.81 years, and 3.74 years respectively. The median durations of high - performing interest - rate bond funds and credit bond funds changed by - 0.07 years and + 0.10 years to 6.39 years and 4.35 years respectively [3][39]. 3.2.3 Allocation Disk - **Primary Market**: The primary subscription demand for treasury bonds and policy - financial bonds decreased this week, and the subscription demand for ultra - long bonds was differentiated. The weighted average full - market multiples of treasury bonds and policy - financial bonds decreased from 3.39 times and 3.00 times in the previous week to 2.85 times and 2.80 times respectively. For treasury bonds and policy - financial bonds over 10Y, the weighted average full - market multiples decreased from 3.63 times to 3.33 times and increased from 3.34 times to 3.40 times respectively [53]. - **Secondary Market** - **Large - scale Banks**: The increasing supply of ultra - long bonds may restrict their secondary - market承接 capacity. Since June, large - scale banks have increased their net buying of treasury bonds within 1Y, but the cumulative net buying scale this year is still far lower than that of the same period in 2024. The net buying of 1 - 3Y treasury bonds increased from May to July and declined since August. As of September 26, the cumulative net buying scale of 1 - 3Y treasury bonds this year was 7271 billion yuan [58][60]. - **Rural Commercial Banks**: Their cumulative net buying scale of current bonds this year is significantly weaker than in previous years, mainly due to the weak net buying of short - term bonds within 1Y. However, the net buying of 7 - 10Y and over 10Y current bonds is significantly higher than in previous years [74]. - **Insurance**: The net buying strength of current bonds by insurance this year is significantly higher than in previous years, mainly due to the strong buying of ultra - long bonds over 10Y. As of September 19, the ratio of insurance's cumulative net buying of current bonds to the cumulative issuance scale of government bonds over 10Y was 30.04%, higher than 29.18% at the end of September last year [80]. - **Wealth Management**: Since June, the cumulative net buying scale of current bonds by wealth management has continued to rise. This week, the duration of net - bought current bonds in the secondary market reached the highest point since February 23, 2024. As of September 26, the weighted average duration of cumulative net - bought current bonds was 1.78 years, an increase of 0.03 years compared with September 19 [90][92]. 3.3 Asset Management Product Tracking - Since September, the growth rate of bond fund scale is still lower than that of equity funds. The scale of bond funds and equity funds increased by 1418 billion yuan and 2019 billion yuan respectively in September, compared with 732 billion yuan and 4855 billion yuan in August. - The issuance share of newly established bond - type funds declined this week. The scale of newly established bond funds this week was 106 billion yuan, down from 486 billion yuan in the previous week. - This week, the net value of various types of bond funds dropped significantly, with credit bond funds experiencing larger declines. Most interest and credit bond funds recorded negative returns in the past three months [95].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - Since Q3 this year, the bond market has adjusted significantly, but the decline in the duration of public - offering bond funds is not obvious. It is expected that public - offering bond funds will maintain a moderately high duration level, with the 10 - year Treasury yield oscillating in the range of 1.7% - 1.8%. As the correlation between stocks and bonds weakens and fundamental pressure rises, the bond market environment in the fourth quarter is expected to be better than that in the third quarter [2][8] 3. Summary According to the Directory 3.1 Third - quarter Bond Market Adjustment with No Obvious Decline in Bond Fund Duration - In the third - quarter bond market adjustment, the decline in the duration of bond funds was not obvious. For example, in Q1, the 10 - year Treasury yield rose from about 1.6% in early February to nearly 1.9% in mid - March, and the median duration of the whole - market bond funds dropped from a high of 3 years to about 2.1 years. However, as of September 17, the median duration of public - offering bond funds remained at about 2.5 years, and the median duration of medium - and long - term interest - rate bond funds remained at about 3.1 years [5][14] 3.2 Four Reasons Why Bond Fund Duration is Difficult to Decrease - **Mild Adjustment and Multiple Repairs**: Compared with the Q1 adjustment, the Q3 bond market adjustment was relatively mild, with multiple repairs during the period and did not reach the short - term stop - loss lines of some funds. The adjustment range of the 10 - year Treasury active bond yield since Q3 was less than 20bps, and the adjustment lasted nearly a quarter. In contrast, in Q1, the 10 - year Treasury yield rose about 30bps in more than a month [8][17] - **Performance Assessment and Market Expectations**: The bond market has been volatile this year, especially the performance of bond funds focusing on the duration strategy was significantly weaker than last year. As the fourth quarter is a traditional window for bond market pre -emption and repair, from the perspective of achieving the annual performance assessment, bond funds may not significantly reduce their duration. As of September 14, the median yield of the whole - market bond funds this year was 1.21%, significantly lower than last year's 3.78% [8][26] - **Limited Strategy Options in a Low - interest - rate Environment**: The current bond market is in a low - interest - rate environment, with limited market strategy capacity and options. Public - offering funds have to extend the duration to obtain coupons. Institutions such as wealth management and bank self - operation also have a demand for long - duration bond allocations. As of August this year, the net financing proportion of long - term credit bonds rose to about 33%, a record high [8][33] - **Lack of Massive Redemption Pressure**: Institutions usually conduct continuous and large - scale redemptions of long - term bonds only when the bond market shows obvious "negative feedback" characteristics. A normal market adjustment of general amplitude may not trigger large - scale redemptions and re - allocation of redeemed assets. The current bond market is slowly oscillating and correcting, without triggering widespread market panic [8][34]

1. Report Industry Investment Rating The provided content does not mention the industry investment rating. 2. Core Viewpoints of the Report - This week, the pressure of fund selling intensified, and the sold bond types spread from long - term and ultra - long - term interest - rate bonds to credit bonds and Tier 2 capital bonds. The pessimistic sentiment in the bond market spread again, with the 10Y Treasury bond rate smoothly breaking through the key point of 1.80%. Although the bond market sentiment recovered on Friday and funds turned to net buying, the bond market allocation buyers may continue to be absent, and there may still be adjustment space in the bond market, especially for ultra - long - term bonds [9]. - Since August, the growth rate of bond fund scale has been lower than that of stock funds. This week, the issuance share of newly established bond funds remained low, and the net value of various types of bond funds declined significantly, with credit bond funds showing relatively better resistance to decline. Most interest - rate and credit bond funds recorded negative returns in the past three months [90]. 3. Summary According to the Directory 3.1 Overall Sentiment: The Bond Market Vitality Index Declined Significantly - As of September 12, the bond market vitality index decreased by 29 pcts to 22% compared with September 5, and the 5D - MA decreased by 15 pcts to 32%. The rising indicators of bond market vitality included the trading volume of the active 10Y China Development Bank bond / the balance of 9 - 10Y China Development Bank bonds and the excess level of the inter - bank bond market leverage ratio compared with the average of the past 4 years. The declining indicators included the median duration of medium - and long - term pure bond funds, the implied tax rate of the 10 - year China Development Bank bond, and the turnover rate of 30Y Treasury bonds [1][10][12]. 3.2 Institutional Behavior: Funds Sold Heavily, while Rural Commercial Banks and Insurance Companies Strengthened Their Buying 3.2.1 Buying and Selling Strength and Bond Type Selection: Funds Bought Interest - Rate Bonds within 1Y and Sold All Other Types - The net buying strength ranking in the current bond market this week was: large banks > insurance companies > wealth management > other product types > rural finance > others > money market funds > foreign - funded banks. The net selling strength ranking was: funds > city commercial banks > joint - stock banks > securities firms. For ultra - long - term bonds (bonds over 15Y), the net buying strength ranking was: insurance companies > rural commercial banks > wealth management > securities firms > others > other product types, and the net selling strength ranking was: funds > large banks > joint - stock banks > city commercial banks > foreign - funded banks [22]. - From September 8 to 12, the bond market showed different trends each day. Funds mainly sold long - term and ultra - long - term interest - rate bonds, and gradually increased their selling of credit bonds and Tier 2 capital bonds. Rural commercial banks mainly bought long - term and ultra - long - term bonds, and insurance companies' buying strength gradually increased [22][23]. 3.2.2 Trading Portfolio: All Types of Bond Funds Continued to Reduce Duration, with Credit Bond Funds Having a Larger Reduction - As of September 12, the median duration of the full - sample medium - and long - term pure bond funds decreased by 0.11 years compared with September 5. Among them, the median durations of pure interest - rate bond funds, interest - rate bond funds, and credit bond funds decreased by 0.06 years, 0.12 years, and 0.21 years respectively. The median durations of high - performance interest - rate bond funds and credit bond funds decreased by 0.06 years and 0.32 years respectively [42]. 3.2.3 Allocation Portfolio: Wealth Management Extended Duration in the Secondary Market, while Rural Commercial Banks and Insurance Companies Deployed Ultra - Long - Term Bonds - **Differentiated Primary Subscription Demand for Treasury Bonds and Policy - Financial Bonds**: This week, the primary subscription demand for Treasury bonds and policy - financial bonds was differentiated, and the demand for ultra - long - term bonds was also differentiated. The weighted average overall multiples of Treasury bonds and policy - financial bonds changed compared with the previous week [54]. - **Large Banks**: The increase in the supply of ultra - long - term bonds may restrict large banks' ability to buy in the secondary market. In terms of short - term Treasury bonds, large banks increased their net buying of Treasury bonds within 1Y since June, but the cumulative net buying scale this year was still far lower than that of the same period in 2024. The net buying of 1 - 3Y Treasury bonds increased from May to July and decreased in August [58][59]. - **Rural Commercial Banks**: The cumulative net buying scale of rural commercial banks this year was significantly weaker than in previous years, mainly due to the weak net buying of short - term bonds within 1Y. However, the net buying strength of 7 - 10Y and over 10Y bonds was significantly higher than in previous years [71]. - **Insurance Companies**: The net buying strength of insurance companies for bonds this year was significantly higher than in previous years, mainly due to their strong buying of ultra - long - term bonds over 10Y. As of September 12, the ratio of the cumulative net bond buying of insurance companies to the cumulative premium income and the ratio to the cumulative issuance scale of over 10Y government bonds were both slightly higher than at the end of September last year [79]. - **Wealth Management**: Since June, the cumulative net buying scale of wealth management products has continued to rise, and the net buying of bonds over 10Y was particularly strong. This week, the duration of the net - bought bonds in the secondary market remained flat, still at the highest level since February 23, 2024 [85][87]. 3.3 Asset Management Product Tracking: Most Interest - Rate and Credit Bond Funds Recorded Negative Returns in the Past Three Months - Since August, the growth rate of bond fund scale has been lower than that of stock funds. This week, the scale of newly established bond funds was only 27 billion yuan, continuing to decline from the previous week [90]. - This week, the net value of various types of bond funds declined significantly, with credit bond funds showing relatively better resistance to decline. Most interest - rate and credit bond funds recorded negative returns in the past three months [90].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - This week, the equity market continued to rise strongly, and the bond market remained highly volatile. However, from the perspective of institutional behavior, the sentiment of trading desks stabilized significantly in the second half of the week, enhancing the bond market's resilience to pressure. The selling pressure from funds on interest - rate bonds was concentrated in the first two days, and they turned to net buyers in the second half of the week. The purchasing power of allocation desks has weakened. The focus in the future is still on the redemption pressure and sentiment improvement of trading desks [9]. 3. Summary According to the Table of Contents 3.1 Overall Sentiment: Bond Market Vitality Index Declined - The bond market vitality index declined this week. As of August 22, the bond market vitality index dropped 12 pcts to 17% compared to August 15, and the 5D - MA decreased 4 pcts to 23% [10]. - Indicators of rising bond market vitality include the median duration of medium - and long - term pure bond funds (the rolling two - year percentile increased from 98.3% to 99.7%), the excess level of the inter - bank bond market leverage ratio compared to the average of the past four years (the rolling two - year percentile increased from 24% to 26%), and the implied tax rate of the 10 - year China Development Bank bond (inverse) (the rolling two - year percentile increased from 4% to 8%) [1]. - Indicators of falling bond market vitality include the trading volume of the active 10Y CDB bond / the balance of 9 - 10Y CDB bonds (the rolling two - year percentile decreased from 86% to 38%) and the turnover rate of 30Y treasury bonds (the rolling two - year percentile decreased from 55% to 44%) [1]. 3.2 Institutional Behavior: Trading Desks Were Net Sellers, and the Purchasing Power of Allocation Desks Weakened 3.2.1 Buying and Selling Strength and Bond Selection - In the cash bond market this week, the order of net buying strength was large banks > insurance > other product types > wealth management > overseas institutions and others > rural financial institutions, and the order of net selling strength was funds > city commercial banks > securities firms > money market funds > joint - stock banks. For ultra - long bonds (bonds with a maturity of over 15 years), the order of net buying strength was insurance > rural commercial banks > city commercial banks > wealth management > overseas institutions and others, and the order of net selling strength was funds > large banks > joint - stock banks > securities firms > other product types [20]. - The main bond types of various institutions are as follows: large banks mainly focus on 3 - 5Y interest - rate bonds; rural commercial banks have no obvious main bond types; insurance mainly focuses on 7 - 10Y credit bonds; funds have no obvious main bond types; wealth management mainly focuses on 1 - 3Y credit bonds; other product types mainly focus on 3 - 5Y interest - rate bonds and 7 - 10Y other bonds [2]. 3.2.2 Trading Desks: Interest - Rate Bond Funds Significantly Increased Duration, Credit Bond Funds Slightly Increased Duration, and High - Performing Bond Funds Made Smaller Duration Adjustments - As of August 22, the mean and median durations of the full - sample medium - and long - term pure bond funds increased by 0.05 years and 0.08 years respectively compared to August 15, reaching 4.61 years and 4.48 years, and were at the 99.1% and 99.7% rolling two - year percentiles respectively. Among them, the median durations of pure interest - rate bond funds, interest - rate bond funds, and credit bond funds increased by 0.42 years, 0.23 years, and 0.03 years respectively, reaching 5.85 years, 5.47 years, and 4.05 years. The median durations of high - performing interest - rate bond funds and credit bond funds increased by 0.33 years and 0.11 years respectively, reaching 6.87 years and 4.65 years [39]. 3.2.3 Allocation Desks: Wealth Management Extended Duration in the Secondary Market, Rural Commercial Banks and Insurance Deployed Ultra - Long Bonds - **Differentiated Primary Subscription Demand for Treasury Bonds and Policy Financial Bonds, Declining Demand for Ultra - Long Bonds**: This week, the primary subscription demand for treasury bonds and policy financial bonds showed differentiation, with the demand for ultra - long bonds declining. The weighted average full - coverage multiples of treasury bonds and policy financial bonds decreased from 3.30 times to 2.87 times and increased from 2.87 times to 2.98 times respectively compared to the previous week. Among them, the weighted average full - coverage multiples of treasury bonds and policy financial bonds with a maturity of 10Y and above decreased from 4.08 times to 2.69 times and from 2.62 times to 2.51 times respectively [52]. - **Large Banks: Maintained Strong Net Buying of 1 - 3Y Treasury Bonds since August**: Since the beginning of this year, the issuance of government bonds has been fast and the duration has been long. Large banks' net selling of cash bonds in the secondary market in the first half of the year was significantly stronger than in the same period of previous years. From July to August, large banks increased their net buying. As of August 22, the cumulative net selling of cash bonds for the whole year was lower than the levels in the same period of 2022 and 2023. In terms of short - term treasury bonds, large banks increased their net buying of treasury bonds with a maturity of less than 1Y since June, but the cumulative net buying since the beginning of the year was still much lower than the level in the same period of 2024 and higher than the level in 2023. Large banks maintained strong net buying of 1 - 3Y treasury bonds from May to July, and the daily average net buying strength decreased slightly in August compared to July. As of August 22, the cumulative net buying of 1 - 3Y treasury bonds this year was 5657 billion yuan (compared to 5330 billion yuan at the end of August 2024) [57]. - **Rural Commercial Banks: Weak Bond - Buying Strength, Focusing on Long - Term Bonds and Neglecting Short - Term Bonds**: The cumulative net buying of cash bonds by rural commercial banks since the beginning of this year has been significantly weaker than in the same period of previous years, mainly due to the weak net buying of short - term bonds with a maturity of less than 1Y. As of August 22, rural commercial banks had a cumulative net selling of 3732 billion yuan of bonds with a maturity of less than 1Y (compared to net buying of 1.99 trillion yuan and 2.67 trillion yuan at the end of August in 2023 and 2024 respectively). However, the net buying of bonds with a maturity of 7 - 10Y and over 10Y was higher than in the same period of previous years [68]. - **Insurance: The Accelerated Issuance of Government Bonds Facilitated the Deployment of Ultra - Long Bonds by Insurance**: The net buying of cash bonds by insurance since the beginning of this year has been significantly higher than in the same period of previous years, mainly due to the strong buying of ultra - long bonds with a maturity of over 10Y. Assuming that the cumulative year - on - year growth rates of premium income in July and August are 6% and 8% respectively, as of August 22, the ratio of cumulative net buying of cash bonds to cumulative premium income this year reached 47.76%, exceeding the level of 40.10% at the end of August last year. The strong allocation by insurance is mainly due to the sufficient supply of ultra - long - term government bonds this year. As of August 22, the ratio of insurance's cumulative net buying of cash bonds to the cumulative issuance of government bonds with a maturity of over 10Y was only 28.28%, lower than the levels of 35.14% and 31.15% at the end of July and August last year [75]. - **Wealth Management: The Duration in the Secondary Market Rose Again**: Since June, the cumulative net buying of cash bonds by wealth management has been continuously increasing and is significantly higher than the levels of the past three years. In particular, the net buying of bonds with a maturity of over 10Y has been very strong. As of August 22, wealth management had a cumulative net buying of 1414 billion yuan of bonds with a maturity of over 10Y this year, while in previous years (except 2022), there was cumulative net selling in the same period. This week, the duration of wealth management's net buying of cash bonds in the secondary market remained basically the same and was still at the highest level since February 23, 2024. As of August 22, the weighted average duration of wealth management's cumulative net buying of cash bonds was 1.76 years, the same as on August 15 [77][83]. 3.3 Asset Management Product Tracking: Most Interest - Rate Bond Funds Recorded Negative Returns in the Past Three Months - Since August, the month - on - month growth rate of the scale of equity funds has been higher than that of bond funds. In August, the month - on - month increases in the scale of bond funds and equity funds were 57.8 billion yuan and 339 billion yuan respectively, compared to 142.3 billion yuan and 164.1 billion yuan in July. - The issuance share of newly established bond - type funds this week was still low. The scale of newly established bond funds this week was only 3.7 billion yuan, which rebounded from 1.2 billion yuan in the previous week but was still at a relatively low level. - In terms of the performance of bond funds, the net value of various types of bond funds continued to decline significantly this week, and credit bond funds had relatively stronger resistance to decline. The median annualized returns of pure interest - rate bond funds, interest - rate bond funds, and credit bond funds in the past week were - 8.6%, - 7.8%, and - 7.1% respectively. Most pure interest - rate bond funds and interest - rate bond funds recorded negative returns in the past three months [86].

Core Viewpoint - The bond market is significantly influenced by the stock market, particularly in a stock bull market driven by funds, while an economic recovery-driven stock bull market may lead to a bond bear market [1] Group 1: Market Dynamics - The current bond fund net purchases of ultra-long-term bonds have decreased to 84.4 billion, down approximately 90 billion from its peak [1] - Since July 1, broker proprietary trading has net sold ultra-long-term bonds by nearly 120 billion [1] - The duration of both bond funds and broker proprietary trading has significantly decreased, indicating a potential future demand for extending duration [1] Group 2: Economic Indicators - The 10-year yield has reached a new high, while the overall A-share market has also hit a historical peak, although trading volume has slightly declined [1] - The future influence of the stock market on the bond market is expected to diminish as the duration of broker proprietary trading and bond funds decreases, ultimately returning to fundamentals [1] Group 3: Investment Outlook - The forecast for the second half of the year for the 10-year government bond yield is between 1.6% and 1.8%, with a bullish outlook due to factors such as central bank easing, adjustment benefits for banks, and rising economic downward pressure [1] - Investors are encouraged to value 5-year capital bonds and 30-year government bonds with yields above 2% [1] Group 4: ETF Performance - The Ping An Company Bond ETF (511030) has shown the best performance in terms of drawdown control during the current bond market adjustment, with a relatively stable net value [1] - A table of various ETFs is provided, showing their scale, recent performance, and maximum drawdown, indicating the varying performance of different bond ETFs [1]

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report After a period of volatile market conditions, interest rates declined slightly in a narrow range this week, and institutional behavior stabilized overall, lacking a clear willingness to go long or short. Funds showed a more stable willingness to net - buy credit bonds than interest - rate bonds. The issuance of the first batch of tax - increased local bonds was smooth, and subsequent observation is needed to see if institutional bullish sentiment will increase [10]. 3. Summary by Relevant Catalogs 3.1 Overall Sentiment: Decline in Bond Market Vitality Index - As of August 8, the bond market vitality index decreased by 35 pcts to 14% compared to August 1, and the 5D - MA decreased by 19 pcts to 26%. Indicators of bond market vitality cooling include the decline in the trading volume of 10Y CDB active bonds/9 - 10Y CDB bond balance, the decrease in the inter - bank bond market leverage ratio, the change in the median duration of medium - and long - term pure bond funds, the decline in the implied tax rate of 10Y CDB bonds, and the decrease in the turnover rate of 30Y treasury bonds [1][11][13]. 3.2 Institutional Behavior: Bond Market Stabilized, Institutions Remained on the Sidelines 3.2.1 Buying and Selling Strength and Bond Selection: Light Trading of Interest - Rate Bonds, Continuous Net Buying of Credit Bonds by Funds - In the current bond market, the order of net - buying strength in the cash bond market is: funds > other product types > wealth management > insurance > overseas institutions and others; the order of net - selling strength is: joint - stock banks > city commercial banks > rural commercial banks > securities firms. For ultra - long bonds (bonds with a maturity of over 15 years), the order of net - buying strength is: funds > insurance > rural commercial banks > overseas institutions and others; the order of net - selling strength is: large - scale banks > joint - stock banks > other product types > city commercial banks > securities firms [23]. - Different institutions have different main bond types. For example, large - scale banks focus on interest - rate bonds within 1Y, 1 - 3Y, and 5 - 7Y; funds focus on certificates of deposit, credit bonds within 1Y, and 1 - 3Y credit bonds [2][28]. 3.2.2 Trading Portfolio: Slight Increase in Durations of Credit Bond Funds and Interest - Rate Bond Funds, Smaller Duration Adjustments for High - Performing Bond Funds - As of August 8, the mean and median durations of the full - sample medium - and long - term pure bond funds increased by 0.04 years and 0.03 years respectively compared to August 1, reaching 4.56 years and 4.42 years, at the 98.7% quantile over the past two years. Among them, the median durations of pure interest - rate bond funds, interest - rate bond funds, and credit bond funds increased by 0.06 years, 0.03 years, and 0.03 years respectively. High - performing bond funds had smaller duration adjustments [41][44]. 3.2.3 Allocation Portfolio: Wealth Management Extended Duration in the Secondary Market, Rural Commercial Banks and Insurance Deployed Ultra - Long Bonds - **Primary Market**: This week, the primary - market subscription demand for treasury bonds decreased, while that for policy - financial bonds increased. The weighted average full - coverage multiples of treasury bonds and policy - financial bonds changed accordingly [58]. - **Large - scale Banks**: As of August 8, the cumulative net - buying scale of 1 - 3Y treasury bonds this year was close to the same period last year. Although large - scale banks increased their net - buying of short - term treasury bonds since June, the cumulative net - buying scale was still lower than that in 2024 [66]. - **Rural Commercial Banks**: The cumulative net - buying scale of cash bonds by rural commercial banks this year was significantly weaker than in previous years, mainly due to the weak net - buying of short - term bonds within 1Y. However, the net - buying strength of 7 - 10Y and over - 10Y bonds was higher than in previous years [78]. - **Insurance**: The net - buying strength of cash bonds by insurance this year was significantly higher than in previous years, mainly due to the strong buying of ultra - long bonds over 10Y. As of August 8, the ratio of cumulative net - buying of cash bonds to cumulative premium income exceeded that at the end of August last year [86]. - **Wealth Management**: Since June, the cumulative net - buying scale of cash bonds by wealth management has continued to rise. This week, the duration of net - bought cash bonds in the secondary market decreased slightly but remained at a relatively high level since February 23, 2024 [95][97]. 3.3 Asset Management Product Tracking: More than Half of Credit Bond Funds Had Positive Returns in the Past Month - **Wealth Management**: As of the week of August 3, the wealth management scale decreased by 900 million yuan in August, far lower than the estimated value based on the average monthly growth rate in the past three years. The fixed - income wealth management products decreased by 1.99 billion yuan. The wealth management break - even rate increased [98]. - **Bond Funds**: Since August, the scale of bond funds increased by 3.83 billion yuan, higher than that of equity funds. The newly established bond funds this week had a relatively large scale, ranking second - highest this year. This week, the net values of all types of bond funds continued to rise, with credit bond funds performing better [109].