Fixed Income Research - The report discusses the evolving narrative of inflation, highlighting a rebalancing of supply and demand, and a shift in institutional behavior towards fixed income investments [2][3] - It emphasizes the need to monitor key factors such as inflation, supply-demand dynamics in the bond market, and the correlation between stocks and bonds as critical variables for the second quarter [2] Cultural Research: Pop Mart - Pop Mart has demonstrated significant capabilities in IP platformization and is accelerating its overseas expansion, maintaining a buy rating [2][7] - The company achieved a revenue of 371.2 billion yuan in 2025, representing a year-on-year growth of 184.7%, with overseas revenue growing by 291.9% [7][9] - The plush category has become the largest revenue contributor, with a revenue of 187.1 billion yuan in 2025, marking a growth of 560.6% [8] Automotive Research: China National Heavy Duty Truck Group - China National Heavy Duty Truck Group reported a significant increase in heavy truck sales, solidifying its position as a leader in exports [2][10] - The company achieved a revenue of 1,095.4 billion yuan in 2025, with a year-on-year growth of 15.2%, and a net profit of 70.2 billion yuan, up 19.8% [11][13] - The report forecasts net profits of 80 billion yuan for 2026, reflecting a growth of 4% [10][11]

1. Report Industry Investment Rating No information provided in the content. 2. Core Viewpoints - The bond market in February 2026 may continue to fluctuate, with neither bulls nor bears having a dominant position. The convergence of market risk appetite and weakening fundamental data may drive interest rates down, while the concentrated supply of government bonds at the beginning of February, potential capital fluctuations before the Spring Festival, and uncertainty in inflation repair may act as resistance to interest rate declines [2][63]. - Currently, institutional strategies are consistently biased towards risk aversion, with the duration of interest - rate bond funds at a low level since 2025. The coupon - bearing sector is relatively crowded, while various spreads within interest - rate bonds may provide opportunities for excess returns [6][63]. 3. Summary by Relevant Contents 3.1 January Bond Market: High - Open and Low - Close - The long - end interest rates in the bond market in January experienced an unexpected high - open and low - close trend. Supply - demand changes, risk appetite adjustment, institutional behavior, and tax - period disturbances were the main influencing factors. The 10 - year Treasury yield started at 1.85%, reached a high of 1.90% at the beginning of the month, and ended at 1.81% at the end of the month [1][11]. - From a structural perspective, asset management institutions preferred coupon - bearing assets such as 3 - 5 - year medium - and long - term credit bonds and Tier 2 and perpetual bonds to lay a foundation for high static yields at the beginning of the year [1][20]. - In January, the interest - rate pricing logic changed. The negative impact of potential changes in bond - fund regulation dissipated, while the bullish logic of the supply - demand mismatch of government bonds emerged. The suppression of the bond market by the equity market also eased [1][24]. 3.2 February Bond Market: Four Key Lines 3.2.1 Supply - Demand Structure - In January, the actual net supply of government bonds was 1.18 trillion yuan, lower than the expected 1.35 - 1.37 trillion yuan. The main reason was that five provinces and cities that originally planned to issue local bonds in January did not issue them, with a cumulative scale of 1858 billion yuan [25]. - It is estimated that the net issuance of Treasury bonds and local bonds in February will be 420 billion and 650 billion yuan respectively, totaling 1.07 trillion yuan, similar to the scale in January. This may ease the supply - demand mismatch at the beginning of the year. However, the supply pressure in February is concentrated in the first week, with a single - week issuance of 976.7 billion yuan, accounting for about 53% of the total February issuance, which may disrupt primary - market issuance pricing and affect secondary - market yields [2][28]. 3.2.2 Capital Changes - In February, the capital market has three challenges: the impact of concentrated net payments for government bonds, seasonal cash - withdrawal demand before the Spring Festival, and the coincidence of the tax period and month - end after the Spring Festival. The inter - bank liquidity may rely more on central - bank injections [2][32]. - Past experience shows that the central bank's capital injections during the Spring Festival have generally been sufficient. Except in 2025, the 7 - day capital rate usually does not fluctuate significantly before the Spring Festival, and it often shows a downward trend from T - 3 days before the Spring Festival. After the Spring Festival, the capital rate fluctuates, but the amplitude is smaller than before the Spring Festival [2][42]. 3.2.3 Risk Appetite Adjustment - In terms of equity assets, after the tightening of financing supervision on January 14, the "slow - rise" of the stock market became the consensus. The profitability of equity assets returned to normal, and the continuous suppression of the bond market by the "strong risk appetite" weakened [3][45]. - Regarding gold assets, after Kevin Warsh was nominated as the next Fed chairman, the spot price of London gold plunged on January 30, with a single - day decline of 9.25%, the largest since March 1983. As the price of gold fluctuates at a high level, some funds may turn to lower - volatility assets, which is beneficial to the bond market [3][48]. - After the Spring Festival, the market may enter the policy - gaming stage before the Two Sessions. If the national GDP growth target is slightly lowered, the expectation of strong - stimulus policies may decline, which is relatively favorable for the bond market [51]. 3.2.4 Inflation Concerns - Fundamentally, the manufacturing PMI in January fell 0.8 percentage points to 49.3%, indicating a decline in the economy at the beginning of the year. The credit performance in January may be similar to that in 2025, with only a slight year - on - year increase, and the "good start" of credit is lackluster [3][52]. - However, inflation data may always be a concern for the bond market. Domestic high - frequency price data and the year - on - year increase of the overseas CRB industrial - raw - material index suggest that the PPI data in January may continue to rise, which may challenge the bullish sentiment in the bond market [3][58]. 3.3 Bond - Market Strategy: Seek Progress While Maintaining Stability - Given the above four key lines, the bond market in February may continue to fluctuate. The strategy of "seeking stability" is mainly reflected in the duration aspect, with the portfolio duration maintained at a neutral level, such as around 3.5 years for interest - rate products [6][66]. - The strategy of "seeking progress" is reflected in the selection of bond varieties. For example, investors can consider taking advantage of the spread - compression opportunities within interest - rate bonds [6][66].

Core Viewpoint - The bond market is currently experiencing weakness, with yields rising and limited positive factors supporting the market [1] Market Performance - The majority of government bond futures closed lower, with the 30-year main contract down 0.05% at 111.32, while the 10-year main contract rose 0.03% to 107.855 [2] - The interbank major interest rate bond yields mostly increased, with the 10-year policy bank bond yield rising by 1.9 basis points to 1.9490% and the 30-year government bond yield increasing by 3.05 basis points to 2.282% [2] Primary Market - The China Development Bank's 181-day and 3-year financial bonds had winning yields of 1.5239% and 1.68%, respectively, with bid-to-cover ratios of 3.28 and 3.62 [3] - Agricultural Development Bank's financial bonds for 1.0356 years, 3 years, and 10 years had winning yields of 1.50%, 1.6468%, and 1.9846%, with bid-to-cover ratios of 3.19, 3.09, and 3.81 [3] Funding Conditions - The central bank conducted a 135 billion yuan 7-day reverse repo operation at a rate of 1.40%, with a net withdrawal of 4688 billion yuan for the day [4] - Short-term Shibor rates mostly declined, with the overnight rate rising by 0.6 basis points to 1.264% [4] Institutional Views - CITIC Securities suggests that the new fund sales regulations may have exhausted their negative impact on the bond market, but significant changes in supply and demand dynamics are needed for a trend reversal [5] - Guotai Junan believes that the bond market may face pressure from supply in January, but there could be a smoother recovery after late January [6]

Summary of Conference Call Notes Industry Overview - The discussion primarily revolves around the bond market dynamics and the challenges faced by the financial sector, particularly in relation to the supply and demand of bonds as the year-end approaches [2][3][4]. Key Points and Arguments 1. **Market Conditions**: The bond market is experiencing significant volatility as it approaches year-end, with a notable lack of the traditional December rally seen in previous years. The relationship between interest rates and equities has weakened [2][3]. 2. **Supply and Demand Issues**: There is a growing concern regarding the supply-demand imbalance in the bond market. Factors contributing to this include insufficient insurance company support and banks' inability to absorb long-term bonds [2][3][4]. 3. **Insurance Sector Dynamics**: The insurance sector is undergoing structural changes, with a shift towards dividend insurance products, which now account for 40% of new insurance policies. This trend is expected to rise to 50% next year, impacting the demand for long-term bonds [3][4]. 4. **Banking Sector Concerns**: Banks are reassessing their balance sheets as year-end approaches, leading to potential instability in asset-liability management. The pressure to meet year-end reporting standards is influencing their bond purchasing behavior [4][5]. 5. **Long-term Bond Issuance**: The issuance of long-term bonds has been increasing rapidly, but the growth in premium income from insurance has not kept pace, leading to a mismatch in the market [6][10]. 6. **Market Sentiment**: There is a prevailing sentiment of caution among investors, with many adopting a defensive posture in light of the current market conditions. The expectation of a weak bond market is influencing investment strategies [11][12]. 7. **Liquidity Concerns**: The relationship between liquidity and asset stability is highlighted, with a need for stable liquidity injections to restore balance in the market. The current liquidity situation is described as unstable, affecting trading dynamics [12][15]. 8. **Interest Rate Dynamics**: The yield spread between different bond maturities is under scrutiny, with the current 30-10 year spread reaching 40 basis points, reflecting a return to levels seen in 2022. There is speculation about potential adjustments in the yield curve [12][14]. 9. **Future Outlook**: The market is expected to face continued challenges, with concerns about the sustainability of the current yield levels and the potential for further adjustments in bond issuance strategies [15][16]. Other Important Insights - The discussion emphasizes the need for a flexible approach to investment strategies, particularly in light of the current market volatility and the shifting dynamics between equities and bonds [11][12]. - The impact of external factors, such as global interest rate trends and inflation, is acknowledged as a potential influence on future bond market performance [14][15]. - The importance of understanding the underlying frameworks that govern bond market behavior is stressed, particularly in the context of changing investor sentiment and market expectations [11][12].

Report Industry Investment Rating No relevant content provided. Core Viewpoints of the Report - The recent decline in the bond market is not due to a shift from pessimism to optimism about long - term economic growth but a change in market focus towards long - term issues such as "bond market supply and demand", bond industry career development, and how bond funds can outperform benchmarks. There are also short - term trading opportunities in bond spreads, but the "lock - in" risk is greater than the "missing out" risk [5][27][36]. - The overseas interest rate cut and the turmoil in technology stocks have little impact on the domestic market. The domestic monetary policy is "domestically - oriented" and not restricted by overseas easing. Domestic technology stocks are more resilient than their US counterparts [6][28]. - The market has a strong consensus expectation of "strong stocks and weak bonds" at the beginning of next year, but the spring rally in the equity market depends on a favorable macro - environment of loose liquidity and credit at the turn of the year [8][35]. Summary by Relevant Catalogs Overseas Market - **Federal Reserve Meeting**: The Federal Reserve cut interest rates by 25BP as expected, with a dovish stance. It raised GDP growth expectations, lowered PCE inflation expectations, and restarted balance - sheet expansion with an initial monthly scale of $40 billion [2][10][11]. - **US Stocks**: After the Fed meeting, US stocks first rose and then fell. On Friday, they erased nearly two weeks' worth of gains and returned to the level after the October meeting. The AI technology sector is vulnerable, and Oracle's poor earnings on December 10 dragged down the entire US stock market [14]. - **US Dollar and US Treasury Bonds**: The US dollar index weakened by 0.8% to 98.4 after the interest rate cut. The 10Y US Treasury bond yield first declined by about 8BP to 4.1% and then returned to the pre - meeting level of 4.18% [3][14]. Domestic Market - **Policy**: The Central Economic Work Conference reassured the market about previous concerns. The total policy emphasizes necessary policy strength. The monetary policy has three changes in its statement compared to last year, and the real - estate policy encourages the acquisition of existing commercial housing for affordable housing [4][20]. - **Economic Data**: In November, CPI was 0.7% year - on - year, up 0.5pct from the previous month, while PPI was - 2.2% year - on - year, down 0.1pct. The increase in corporate bond financing and bill financing pushed up social financing, and corporate loans drove a marginal recovery in credit. M1 and M2 growth rates declined by 1.3pct and 0.2pct respectively compared to the previous month [21][23][25]. - **Market Reaction**: Policy statements and data have little impact on the market. After the bond market's sharp decline last week, a neutral policy statement helped release market tension, and the market recovered the previous week's losses in three days. The economic fundamentals and data present both bullish and bearish signals, and factors such as Treasury supply and equity preference are also attracting market attention [5][27]. - **Institutional Behavior**: Institutions did not form a unified force during the long - bond recovery. Funds were the main force in the long - bond recovery last week, while securities firms hardly participated. Bond funds face redemption pressure, which restricts their ability to maintain a long - position [6][32]. - **Bond Market Outlook**: The bond market shows signs of a "bearish mindset". There are short - term trading opportunities in bond spreads, but the "lock - in" risk is greater than the "missing out" risk [36].

Group 1: Report Industry Investment Rating - The industry rating is not explicitly mentioned in the report regarding the specific investment rating for the bond market [17] Group 2: Core View of the Report - The supply - demand contradiction of ultra - long bonds next year is prominent, and there is a need for the spread to widen. The market is currently trading this trend in advance, and the focus has shifted from short - term factors to long - term supply - demand issues, which is a long - term negative for the market. However, there may be short - term over - selling [3][15] Group 3: Summary by Related Catalogs Bond Market Performance This Week - Ultra - long bonds had a deep decline this week. The 30 - year active bond yield rose from 2.18% last week to 2.28% (up 10BP). The 10 - year bond was relatively stable, with a maximum decline of about 3BP this week and has fluctuated between 1.8% - 1.85% since October. Ultra - long bonds deviated from the stock - bond seesaw, with multiple days of simultaneous decline in stocks and bonds [3][5] New Factors This Week - The Ministry of Finance's positive stance on future fiscal policy has led to market expectations for next year's deficit rate. There are concerns about fund dividends at the end of the year, increasing the pressure on bond fund redemptions. The market's focus is shifting from short - term redemption issues to long - term bond market supply - demand issues, and the supply - demand of ultra - long bonds/local bonds is evolving from point - like to "framework - like" problems, with the spread of ultra - long bonds being re - evaluated [3][5] Demand Side Analysis - **Insurance**: Due to slower liability expansion, asset allocation changes, lower premium income growth (the cumulative year - on - year growth rate of premium income in October 2025 dropped to 7.99%) due to falling predetermined interest rates, more marginal incremental funds flowing to the equity market, and the promotion of dividend - type insurance (with premiums exceeding 700 billion by the end of Q3 2025, up over 10% year - on - year), the demand for ultra - long bonds has significantly weakened. Currently, insurance mainly buys ultra - long bonds from a trading perspective, and local bonds have higher cost - effectiveness than national bonds [3][6] - **Banks**: Constrained by interest rate indicators, banks are difficult to take on a large amount of ultra - long bonds. Due to the large issuance of ultra - long - term government bonds in the past two years, the duration gap of banks' assets and liabilities has been magnified. Under the IRRBB regulatory framework, the interest rate risk of bank books is relatively large. As of the end of 2024, the average economic value sensitivity of state - owned banks (ΔEVE/primary capital) was 12.34%, and some banks' indicators were close to the regulatory attention level of 15%. Banks may mainly buy short - term bonds in secondary bond allocation [3][8] - **Trading Desk (Funds)**: The large redemption pressure of funds and the end of the unilateral bond market have weakened the trading enthusiasm for ultra - long bonds. Since the second half of this year, bond funds have continuously sold ultra - long bonds. When the bull - bond trend ends, a large amount of funds will withdraw from such assets [3][9] Supply Side Analysis - **Policy Tone**: In early December, the Minister of Finance mentioned in a signed article that "beyond - expected" policy measures would be introduced, which may increase the supply of ultra - long bonds [3][13] - **Supply Scale**: If the deficit rate is further raised from this year's 4.0% level, the supply of government bonds may increase by nearly one trillion yuan [3][13] - **Supply Maturity**: Since 2024, the issuance scale of long - term and ultra - long - term government bonds has increased significantly, and the proportion of government bonds with a maturity of over 10 years has risen from 20% in 2021 to 26% in 2025. If this trend continues next year, the supply pressure of ultra - long bonds will increase. However, if the demand for ultra - long - term bonds in the secondary market weakens, it may affect primary issuance, and the maturity structure of local bonds may be adjusted first [3][13]