Report Summary 1. Report Industry Investment Rating No information about the industry investment rating is provided in the report. 2. Core Viewpoints - The long - term interest rates were weak under the background of the Iran conflict and high international oil prices this week, while the medium - and short - term interest rates were strong due to the influence of the inter - bank deposit self - regulatory mechanism. The current interest rate curve is steepening, and the weak performance of long - term bond interest rates is actually due to the increasing pricing power of securities firms [5][11]. - Securities firms sold large amounts of 7Y, 10Y, and 30Y treasury bonds this week. Large and small and medium - sized banks bought 7Y and 10Y bonds respectively, and small and medium - sized banks were the main buyers of 30 - year treasury bonds. Public funds' net purchases of treasury bonds of each maturity were low. In the case of policy financial bonds, public funds mainly sold 10 - year bonds and bought 3 - year bonds, indicating that they no longer prefer long - term bonds and are turning to medium - and short - term interest - rate bonds. The pricing power of securities firms for ultra - long bonds has further increased [5][11]. - There are two marginal changes. First, securities firms have a relatively strong preference for the 7Y treasury bond variety recently, with a similar preference level to the 10Y variety. Second, banks are net buyers of 7Y policy financial bonds, indicating that institutions are generally optimistic about the compression of the medium - and short - term tax spread, and banks are pre - emptively buying state - owned development bonds [5][11]. - On March 13, the lending concentration of the 30 - year treasury bond active bond 2500006 reached 48%, which is a record high. This reflects that short - sellers are still not giving up after making wrong bets from January to February and are continuing to borrow bonds to increase short - selling. The subsequent short - covering power is expected to drive interest rates down [5][12]. - Currently, public funds have a low willingness to hold ultra - long bonds. Securities firms in the trading market continue to borrow bonds from banks and then sell them short. It is necessary to pay attention to whether inflation expectations continue to ferment and whether the market's expectation of nominal growth rate significantly increases after the release of economic data. It is judged that ultra - long bonds have high allocation value around 2.29% - 2.30%, and the 30Y - 10Y treasury bond term spread is also expected to compress [5][12]. 3. Summary by Directory 1. This Week's Bond Market Review - The long - term interest rates were weak under the influence of the Iran conflict and high international oil prices, while the medium - and short - term interest rates were strong due to the inter - bank deposit self - regulatory mechanism. The interest rate curve is steepening, and the weak long - term bond interest rates are due to the increasing pricing power of securities firms [5][11]. - Securities firms sold large amounts of 7Y, 10Y, and 30Y treasury bonds. Large and small and medium - sized banks bought 7Y and 10Y bonds respectively, and small and medium - sized banks were the main buyers of 30 - year treasury bonds. Public funds' net purchases of treasury bonds of each maturity were low. In the case of policy financial bonds, public funds mainly sold 10 - year bonds and bought 3 - year bonds, indicating a shift to medium - and short - term interest - rate bonds [5][11]. - There are two marginal changes: securities firms' preference for 7Y treasury bonds and banks' net buying of 7Y policy financial bonds, reflecting institutions' optimism about the compression of the medium - and short - term tax spread [5][11]. - The high lending concentration of the 30 - year treasury bond active bond 2500006 on March 13 reflects short - sellers' continued short - selling. The subsequent short - covering power is expected to drive interest rates down [5][12]. - Public funds have a low willingness to hold ultra - long bonds. Securities firms continue to short - sell. It is necessary to pay attention to inflation expectations and economic data. Ultra - long bonds have high allocation value around 2.29% - 2.30%, and the 30Y - 10Y treasury bond term spread is expected to compress [5][12].

1. Report Industry Investment Rating No information provided in the content. 2. Core View of the Report - The pricing power of funds in the bond market has further increased, and there are still short - term long - trading opportunities. The high correlation between funds and interest rate trends has been further strengthened this year, and low interest rate fluctuations imply the enhancement of funds' pricing power in the bond market. Some "unexplained" interest rate increases may be due to the lack of bond - receiving institutions. The impact of fund institutional behavior on interest rate fluctuations may further expand, and short - term redemption pressure is controllable [2][11][15] 3. Summary According to the Directory 3.1 This Week's Institutional Behavior Review - **Correlation between funds and interest rates**: The high correlation between funds and interest rate trends is not new. Since 2024, the behavior of funds and interest rate trends have shown high correlation, and this year, the low - level fluctuation of interest rates has implied the further improvement of funds' pricing power in the bond market, which may be related to bank wealth management outsourcing [2][11][12] - **"Unexplained" interest rate increases**: This phenomenon may be related to the lack of bond - receiving institutions. Insurance institutions have reduced their allocation of national bonds since 2024, and rural commercial banks' intention to buy more as the interest rate adjusts is gradually decreasing [15] 3.2 Yield Curve - **Treasury bonds**: Short - term yields increased, while medium - and long - term yields decreased. The 1Y yield increased by 3bp, the 3Y yield increased by 1bp, the 5Y yield decreased by 2bp, the 7Y yield decreased by 1bp, the 10Y yield decreased by 1bp, the 15Y yield increased by 3bp, and the 30Y yield decreased by 3bp [17] - **China Development Bank bonds**: Yields decreased overall. The 1Y yield increased by 1bp, the 3Y yield decreased by 1bp, the 5Y yield decreased by about 2bp, the 7Y yield decreased by 2bp, the 10Y yield decreased by about 1bp, the 15Y yield decreased by 2bp, and the 30Y yield decreased by 1bp [17] 3.3 Term Spread - **Treasury bonds**: The interest spread increased, and the short - term spread narrowed while the long - term spread was differentiated. The 1Y - DR001 interest spread remained flat overall, and the 1Y - DR007 interest spread increased by 10bp [20] - **China Development Bank bonds**: The interest spread increased, and the short - term spread narrowed while the long - term spread was differentiated. The 1Y - DR001 interest spread increased by 2bp, and the 1Y - DR007 interest spread increased by about 8bp [22] 3.4 Bond Market Leverage and Funding Situation - **Leverage ratio**: It decreased to 107.14%. From September 1st to September 5th, 2025, the leverage ratio fluctuated and increased within the week. As of September 5th, it was about 107.14%, up 0.30pct from last Friday and 0.07pct from Monday [25] - **Average daily trading volume of pledged repurchase**: From September 1st to September 5th, the average daily trading volume of pledged repurchase was about 7.3 trillion yuan, a decrease of 0.24 trillion yuan compared with last week. The average daily trading volume of overnight pledged repurchase was 7.6 trillion yuan, a decrease of 0.43 trillion yuan month - on - month. The average overnight trading volume accounted for 88.35%, an increase of 2.89pct month - on - month [28][33] - **Funding situation**: Bank - based fund outflows first increased and then decreased. The main fund inflow party was funds, and the outflows of money market funds first decreased and then increased. DR007 and R007 fluctuated and decreased [34] 3.5 Duration of Medium - and Long - Term Bond Funds - **Median duration**: The median duration of medium - and long - term bond funds decreased. As of September 5th, the median duration (de - leveraged) was 2.77 years, a decrease of 0.04 years from last Friday; the median duration (including leverage) was 2.95 years, a decrease of 0.16 years from last Friday [45] - **Duration of different types of bond funds**: The median duration (including leverage) of interest - rate bond funds decreased to 3.75 years, a decrease of 0.16 years from last Friday; the median duration (including leverage) of credit bond funds decreased to 2.72 years, a decrease of 0.12 years from last Friday [51] 3.6 Category Strategy Comparison - **Sino - US interest rate spread**: It widened overall. The 1Y spread widened by 23bp, the 2Y spread widened by about 12bp, the 3Y spread widened by 13bp, the 5Y spread widened by 8bp, the 7Y spread widened by 11bp, the 10Y spread widened by 11bp, and the 30Y spread widened by 7bp [55] - **Implied tax rate**: The short - term spread narrowed, and the long - term spread was differentiated. As of September 5th, the 1Y spread between China Development Bank bonds and treasury bonds narrowed by about 1bp, the 3Y spread narrowed by 2bp, the 5Y spread changed by less than 1bp, the 7Y spread narrowed by 1bp, the 10Y spread widened by 1bp, the 15Y spread narrowed by 5bp, and the 30Y spread widened by 2bp [56] 3.7 Bond Lending Balance Changes - On September 5th, the lending concentration of active 10Y treasury bonds, active 10Y China Development Bank bonds, and active 30Y treasury bonds increased; the lending concentration of the second - active 10Y China Development Bank bonds decreased, and the lending concentration of the second - active 10Y treasury bonds remained unchanged. In terms of institutions, the lending of large - scale banks and other institutions decreased, while that of small - and medium - sized banks and securities firms increased [57]