Core Viewpoint - The bond market experienced a significant decline in fund size during Q3 2025, with a net redemption of 508 billion units, marking a record for a single quarter, influenced by market volatility and the attractiveness of equity markets [1][2]. Group 1: Market Performance - Nearly 3,900 bond funds recorded a total net redemption of 508 billion units in Q3, the highest quarterly redemption ever [1][2]. - Over 2,100 bond funds, approximately 55%, experienced net redemptions, with 292 funds redeeming over 1 billion units each [2]. - The total size of bond funds decreased to 10.58 trillion yuan, down from 10.82 trillion yuan at the end of Q2, marking a decline of about 240 billion yuan [2]. Group 2: Factors Influencing the Market - The rapid increase in market risk appetite and the rebound of A-shares since late September led to a "stock-bond seesaw" effect, causing funds to flow from the bond market to equities [3]. - Institutional investors, such as banks and insurance companies, increased redemptions to secure year-end returns [3]. - Despite the overall decline in bond funds, convertible bond funds attracted over 20 billion yuan in net subscriptions due to significant gains, with some funds seeing net value increases exceeding 15% [3]. Group 3: Future Outlook - Industry experts anticipate that while uncertainties remain in the bond market for Q4, the factors that pressured the market in Q3 may weaken, leading to a more favorable environment for fundamentals and liquidity [4]. - Expectations of monetary policy easing, particularly if the Federal Reserve continues to lower interest rates, could enhance domestic monetary conditions [4]. - Analysts predict that the yield curve may steepen, with the 10-year government bond yield potentially dropping below 1.6% and moving towards the 1.4%-1.5% range [4].

1. Report Industry Investment Rating - The rating for Treasury bonds is "Oscillation" [5] 2. Core Views of the Report - In September, economic data continued to weaken, with supply still exceeding demand. The policy in Q3 focused more on structural adjustment than on stabilizing growth. Although this shift brought some positive results, the problem of insufficient endogenous growth momentum in China remained unsolved, and the fading policy effectiveness led to a further weakening of economic data [1][9][10]. - Policy is moderately proactive. The economic growth rate in Q4 is expected to have a small fluctuation range, and the overall economic growth rate this year is high in the first half and low in the second half. As policy effectiveness gradually emerges, the pressure of weakening demand will be partially offset. The bond market sentiment has significantly improved compared to Q3. After the Fourth Plenary Session, as incremental policies are exhausted, the influence of fundamentals on the bond market will reappear, and Treasury bond futures are expected to have a relatively smooth recovery [2][11]. - The bond market is expected to turn from weak to strong, and the yield curve is expected to flatten. During the Fourth Plenary Session, there were relatively many policies, so it is advisable to stay cautious. In November, if the new regulations on fund fees are not considered, incremental policies will be relatively limited. The bond market is expected to refocus on fundamentals and experience a relatively smooth recovery, with the curve oscillating and flattening [3][40] 3. Summary by Relevant Catalogs 3.1 9 - Month Economic Data: Continued Weakening with Supply Exceeding Demand - **Overview of Economic Data**: In September, industrial added - value (工增) increased by 6.5% year - on - year, retail sales of consumer goods (社零) increased by 3.0% year - on - year, and the cumulative year - on - year growth rate of fixed - asset investment from January to September was - 0.5%. The Q3 GDP growth rate was 4.8%, slightly exceeding market expectations [9]. - **Structural Analysis**: Exports were stronger than domestic demand, supply was stronger than demand, and the new economy continued to outperform the old economy, but the investment growth rate of some new economy sectors was also slowing down [1][10]. 3.2 Demand Side 3.2.1 Investment: Cumulative Growth Rate Turns Negative - **Fixed - Asset Investment**: The cumulative year - on - year growth rate of fixed - asset investment from January to September was - 0.5%, and private investment growth rate was - 3.1%, both showing a downward trend [12]. - **Manufacturing Investment**: The cumulative investment growth rate in manufacturing from January to September was 4.0%, and the growth rate in September was - 1.9%, continuing to decline. In the future, the manufacturing investment growth rate is likely to decline with resilience, but the decline rate is relatively controllable [15][16]. - **Infrastructure Investment**: The cumulative growth rate of broad - based infrastructure from January to September was 3.34%, and the narrow - based infrastructure growth rate was 1.1%. The infrastructure growth rate continued to decline but is expected to rise slightly in the future [19]. - **Real Estate Investment**: In September, real estate data continued to weaken. The growth rate of real estate development investment from January to September was - 13.9%. The real estate market's endogenous recovery momentum is insufficient, and the process of stabilizing and rebounding is expected to be tortuous [24][25]. 3.2.2 Consumer Demand: Declining Income and Retail Sales Growth - **Retail Sales Growth**: In September, retail sales of consumer goods increased by 3.0% year - on - year, with a negative month - on - month growth rate. The growth rate of residents' disposable income decreased, and the propensity to consume also declined. The growth momentum of retail sales of consumer goods is weak this year [28][30]. 3.3 Production Side - **Industrial Production**: In September, industrial added - value increased by 6.5% year - on - year, with a relatively fast growth rate. Exports showed resilience, driving production. However, in the future, terminal demand may be weak, which will drag down production, but total supply is unlikely to shrink significantly in Q4 [31][38][39]. 3.4 Bond Market Outlook - **Short - Term Factors**: In the short term, policies and Sino - US trade relations are the main factors affecting the bond market. It is recommended that trading desks adopt a cautious approach [40]. - **Mid - to - Long - Term Outlook**: From late October to November, the bond market is expected to turn from weak to strong. The bond market is expected to oscillate and recover, and the yield curve is expected to flatten [40]. - **Strategies**: For the unilateral strategy, be cautious in short - term trading this week and look for opportunities to build long - term long positions on dips. For the hedging strategy, short - hedgers should wait and see. For the curve strategy, continue to focus on flattening the curve [41][42]