Summary of Conference Call Records Industry Overview - The records primarily discuss the bond market, focusing on government bonds and the impact of monetary policy and fiscal actions on bond pricing and investor sentiment [1][2][3][4][5][7][8][9]. Key Points and Arguments Market Adjustments - Recent adjustments in the bond market have been concentrated in the ultra-long end, particularly influenced by news related to real estate policy changes, indicating persistent bearish sentiment [1]. - The short to medium-term pricing is influenced by the liquidity in the market, with expectations that Q1 2025 may be the last period of tightening in the interbank liquidity [1][7]. "Impossible Trinity" Framework - The bond market faces an "impossible trinity" dilemma where it is challenging to simultaneously achieve extended fiscal durations, avoid central bank purchases of long bonds, and not adjust bank indicators, which constrains the pricing of 30-year government bonds [1][7][9]. Central Bank Operations - The central bank's cautious approach to long-end operations suggests that it is unlikely to become a stable buyer in the ultra-long end of the market, especially during periods of declining interest rates [8][9]. Yield Expectations - The yield on 30-year government bonds is expected to be constrained around 2.35%, with a trading range projected between 2.2% and 2.4% for the foreseeable future [3][13][14]. Investor Sentiment - The sentiment in the bond market has shifted towards a bearish outlook, particularly in response to real estate news, which previously would not have impacted the market significantly [4][12]. - The current market dynamics suggest that the ultra-long end may continue to experience adjustments, with a potential for a prolonged period of volatility [12][18]. Credit Market Dynamics - The credit market is seeing a divergence in performance among different types of banks, with city commercial banks experiencing growth while rural commercial banks and joint-stock banks are contributing to a decline in credit scale [11]. Policy Implications - The monetary policy is expected to focus more on interest rate adjustments rather than quantity controls, which will provide a stable environment for short-term credit bonds [5][6][7]. - The fiscal policy is anticipated to become more aggressive in 2026, which may influence credit and bond market dynamics positively [11]. Other Important Insights - The behavior of institutional investors, particularly in the context of trading versus allocation, plays a significant role in shaping market trends and sentiment [10][12]. - The stability of bank deposits is attributed to a lack of systemic outflows, with a shift towards preventive demand rather than transactional demand [10]. - The bond market is currently characterized by a shift from a "buy and hold" strategy to a more reactive trading approach, particularly in a volatile environment [4][15][16]. This summary encapsulates the critical insights from the conference call records, highlighting the current state and future expectations of the bond market and its influencing factors.

1. Report Industry Investment Rating No information provided in the content. 2. Core View of the Report The current bond market decline is due to the constraint of the "impossible triangle," and before the supply pressure of ultra - long bonds is fully digested by the market, the bond market is unlikely to have a trend - based opportunity. It is expected that the long - end yield will continue to show a weak and volatile trend. The long - end yield of the 30 - year Treasury bond is expected to fluctuate in the range of 2.2% - 2.4%, and the bond market may have a phased repair opportunity in the second half of the first quarter of 2026 [2][8][41]. 3. Summary According to the Directory 3.1 Current Bond Market's "Impossible Triangle" Since the second half of 2025, the bond market has been falling continuously. After the People's Bank of China's unexpected "hawkish" Treasury bond trading operation in November 2025, the market is worried about the carrying pressure of ultra - long - term interest - rate bonds, and the supply of ultra - long bonds has become the core contradiction. From early November 2025 to January 7, 2026, the yield of the 30 - year Treasury bond rose by about 20 basis points, and the price of the ultra - long - term Treasury bond futures (TL) fell by nearly 6 yuan. The current market decline is due to the "impossible triangle" constraint, that is, the following three cannot hold simultaneously: fiscal policy continues to lengthen the debt issuance duration, the central bank does not buy long - duration Treasury bonds, and does not change the interest - rate risk sensitivity index restrictions for banks [4][15]. 3.2 Outlook for the People's Bank of China's Treasury Bond Trading Operations in 2026 It is expected that the People's Bank of China will continue to mainly buy short - duration Treasury bonds, maintaining a "high - frequency and small - volume" monthly operation mode, and guiding the market to reduce irrational expectations and excessive attention to this tool. Treasury bond trading will return to a normal and regular liquidity management tool, and its impact on the bond market will be neutral. Overseas experience shows that large - scale purchases of long - term bonds usually occur when the policy rate drops to a very low level or even zero. Since the domestic policy rate still has a 140 - basis - point space, it is too early for unconventional policies. The current Treasury bond trading operations of the Chinese central bank are more similar to Reserve Management Purchases (RMP) rather than Quantitative Easing (QE) [5][19][20]. 3.3 Outlook for Fiscal Debt Issuance Duration in 2026 Theoretically, when interest rates continue to adjust, local governments will shorten the debt issuance duration. However, this process may face two problems. First, it is a slow process for local governments to actively shorten the duration. The proportion of new local bonds in the stock of local bonds is not high, and the increase in interest expenditure caused by long - duration debt issuance is not significant in the short term, so the possibility of local governments significantly shortening the duration in the short term is low. Second, the term arrangement of local government bond issuance has high flexibility, and the Ministry of Finance does not restrict the scale and quantity of long - term local bond issuance. Therefore, the overall duration of local government stock debt is difficult to significantly shorten in a short time [23]. 3.4 Views on Adjusting Banks' Interest - Rate Sensitivity Indicators Although the adjustment of interest - rate sensitivity indicators can increase the bond - allocation capacity of large banks to some extent, the maturity mismatch trend between the asset and liability ends of banks has been deepening in recent years, and the adjustment of indicators is difficult to significantly expand the ability of large banks to undertake long - term bonds. According to the revision of the regulatory standards for interest - rate risk in the banking book by the Basel Committee in July 2024, the interest - rate parallel upward shock parameter should be lowered from 250BP to 225BP. Based on the data of the six major banks at the end of 2024, this parameter adjustment can release about 1.23% of the indicator space on average, corresponding to about 172.2 billion yuan of Tier - 1 capital. In the scenario of still considering a 250 - basis - point extreme shock and calculating based on the modified duration of 8.35 years of the stock local government bonds, it is expected to add about 824.568 billion yuan of bond - allocation capacity for large banks. However, the maturity mismatch between assets and liabilities of banks is still deepening, with the liability side showing a trend of current - account and non - bank deposits, and the asset side showing a long - term trend, so the ability of banks to undertake long - term bonds is still limited [35]. 3.5 Outlook for the Bond Market The bond market still faces the constraint of the "impossible triangle." Before the supply narrative of ultra - long bonds is fully priced, there is no obvious opportunity to bottom - fish in the bond market. The view of a weak and volatile long - end yield is maintained, and the yield of the 30 - year Treasury bond may be further adjusted to 2.4%. After the supply pressure of ultra - long bonds is fully digested by the market, the bond market may have a phased repair opportunity, which may occur in the second half of the first quarter of 2026. At that time, the dynamic balance among fiscal debt issuance rhythm, central bank operation attitude, and bank allocation behavior will be the key to determining the market direction [8][41].