1. Report Industry Investment Rating No information about the industry investment rating is provided in the given content. 2. Core Viewpoints of the Report - The current dilemma in the bond market lies in the inconsistent pace between the fiscal extension of bond duration and the central bank's purchase of long - term bonds, resulting in a lack of buyers for long - term bonds. Before this contradiction is resolved, the short - and medium - term bonds are expected to be relatively resilient, while the ultra - long - term bonds may continue to fluctuate weakly [2][11][17]. - There are three possible ways to restore the supply - demand balance of ultra - long - term bonds: the central bank significantly buys long - term treasury bonds; after the long - term bond interest rate adjusts, the fiscal system shortens the bond issuance duration; large banks are further capitalized to relieve the pressure on interest - rate sensitivity regulatory indicators and have more space to buy long - term bonds [2][11][17]. 3. Summary According to Relevant Catalogs 3.1 Recent Bond Market Performance - The short - and medium - term bonds in the bond market have been resilient recently, while the spread of ultra - long - term bonds has widened again. From November 12th to December 5th, the 30Y - 10Y treasury bond term spread widened by 7.3BP, with the 30 - year treasury bond yield rising by 11.4BP to 2.26%, the 10 - year treasury bond yield only rising by 4.1BP, and the 1 - year treasury bond yield remaining stable at around 1.4% [6][15]. 3.2 Reasons for the Dilemma in the Bond Market - Since the bond market entered the low - interest - rate era in 2024, the issuance term of government bonds has been significantly extended. In 2025, from January to November, the weighted average issuance term of government bonds was about 10.2 years, 2.1 years longer than in 2023. Meanwhile, the central bank has been cautious in buying long - term bonds, especially since the fourth quarter of this year, showing a pattern of "buying short, buying less, and buying late". Long - term government bonds are mainly taken on by banks, especially large banks, but large banks are restricted by interest - rate risk indicators and cannot fully absorb these long - term bonds [17]. 3.3 Three Paths to Restore the Supply - Demand Balance of Ultra - long - term Bonds 3.3.1 Central Bank Buying Long - term Bonds - In October 2025, the central bank restarted treasury bond trading, but the trading volume in October and November was small. The reasons for the small volume are that the issuance of government bonds slowed down at the end of the year, and the regulatory authorities were concerned about the "herd effect" in the bond market. - It is possible to expect the central bank to gradually increase the scale of bond purchases and extend the term. On one hand, the long - term bond interest rate has adjusted recently; on the other hand, the regulatory indicator space of large banks is crucial for the smooth issuance of government bonds and requires the coordination of regulatory authorities. - Assuming that the additional ultra - long - term treasury bonds issued each year are mainly absorbed by the central bank's treasury bond trading tools, the central bank's treasury bond purchases may need to reach the trillion - level, but this is only a theoretical estimate and is likely to be less than this scale. From 2024 - 2025, the average annual issuance of treasury bonds over 10 years was close to 6.2 trillion yuan, an increase of about 2.2 trillion yuan compared to 2022 - 2023. The issuance proportion of treasury bonds over 10 years in the past two years exceeded 18%, 4.3 percentage points higher than the average of 2022 - 2023 [24][27]. 3.3.2 Local Governments Reducing Bond Issuance Term - Local governments tend to extend the debt duration when the financing cost decreases. To reduce the supply of long - term local bonds, the local bond interest rate may need to rise first. Based on the data of new local bonds in each province from 2018 to November 2025, a "interest rate - term change" regression model was constructed. The estimated coefficient is significantly negative, indicating that when the market interest rate represented by the 10 - year treasury bond yield decreases, local governments will adopt a strategy of extending the duration. - Regionally, the impact of interest rates on the debt term is more significant in the eastern region. When the interest rate decreases, the debt term in the eastern region is extended more than in the central and western regions. This may be because the eastern region has a more developed economy and better fiscal conditions, while the central and western regions face greater fiscal pressure, and investors are more concerned about long - term local bonds issued there, resulting in a relatively weak effect of reducing financing costs by extending the debt duration [29][30][33]. 3.3.3 The Space for Large Banks to Allocate Long - term Bonds - The core concern in the market is that the interest - rate risk indicators of some banks' bank books may be approaching the regulatory upper limit, which hinders large banks from further taking on long - term bonds. However, this is not new information, and large banks have still been actively taking on local government bonds in 2025. Moreover, this indicator is not a strict hard constraint. - From the numerator perspective, the key is to reduce the duration gap between assets and liabilities. After large banks take on long - term local government bonds at the primary market, they may sell long - term local bonds and buy short - term treasury bonds at the secondary market. Whether this behavior will continue is an important factor in analyzing the long - term spread trend. - From the denominator perspective, the primary capital of banks is being replenished. In 2025, the Ministry of Finance issued special treasury bonds to replenish the capital of some large state - owned banks, which relieved the pressure on the indicators to some extent. Static calculations based on the data at the end of 2024 show that after the four banks increased their capital by 52 billion yuan in 2025, the arithmetic average of the space released for the ΔEVE/primary capital indicator was about 0.86pct. - For banks, if the ΔEVE/primary capital indicator releases 1pct of space, the six large state - owned banks can increase their allocation of 10 - year government bonds by about 1.83 trillion yuan or 30 - year government bonds by about 0.3 trillion yuan. - If large banks continue to take on long - term bonds in 2026, static calculations show that the arithmetic average impact on the ΔEVE/primary capital of the six large state - owned banks is about 2.83pct. To keep the ΔEVE/primary capital below 15%, about 1.46 trillion yuan of primary capital needs to be replenished [35][42][55].