Group 1: Report Industry Investment Rating - Not provided in the content Group 2: Report's Core View - On July 25, 2025, the China Insurance Industry Association announced a reduction in the maximum预定利率 of insurance products, which is in line with market expectations and may open up space for insurance bond allocation [2][13] - By reviewing historical adjustments and recent impacts, this paper anticipates that the current rate cut may have limited effects on premium income growth and long - term treasury bond spread compression, with local bonds being a more likely major allocation choice [9][13][50] Group 3: Summary According to the Table of Contents 1. Definition and Historical Backtracking of the预定利率 of Life Insurance Products - The预定利率 is crucial for calculating an insurance company's profit from interest margin. As the investment return rate of insurance companies decreases, there is an increasing need to lower the预定利率 [14] - The historical adjustment of the预定利率 can be divided into four stages: from 1999 - 2013, it dropped to 2.5%; from 2013 - 2019, it rose to 3.5%; from 2019 - 2024, it gradually declined to 2.5%; since 2025, a dynamic adjustment mechanism has been established [3][15][18] 2. Review of the Impact of Recent Insurance预定利率 Reductions on the Bond Market - **Premium Income**: The "scramble for expiring products" before and during the transition of insurance products led to above - seasonal growth in premium income. In 2024, this growth was more concentrated compared to 2023 [5][21] - **Insurance Bond Allocation Behavior**: In 2023 and 2024, due to the "scramble for expiring products," there was significant above - seasonal growth in insurance bond allocation in August - September. Local bonds were the main allocation, and in 2024, there was an increase in treasury bond and inter - bank certificate of deposit allocation and a decrease in bank perpetual and subordinated bond allocation [6][24][27] - **Bond Market Performance**: In 2023, the spread between 30y local bonds and 30y treasury bonds narrowed; in 2024, the 30 - 10y treasury bond spread compressed significantly, while the spread between 30y local bonds and 30y treasury bonds widened [7][32] 3. New Changes in Insurance Asset Allocation in 2025 - The growth rate of insurance premium income on the liability side has decreased significantly in 2025, but the balance of insurance funds in use has continued to grow at a high rate, and the demand for bond allocation remains strong [37][40] - Bonds are still a preferred choice for insurance institutions. The proportion of bond allocation by life insurance companies has been increasing, mainly to address the issue of "mismatching long - term funds with short - term investments" and the pressure of re - allocating high - yield assets [44] 4. Outlook on the Impact of the Current预定利率 Reduction on the Bond Market - The effect of above - seasonal growth in premium income may be weaker than in the previous two rounds. The "scramble for expiring products" time is limited, and the reduction from 2.5% to 2% may have less of a stimulating effect on consumers [9][50] - Currently, 30y local bonds have higher cost - effectiveness than 30y treasury bonds. The current预定利率 reduction may have limited impact on compressing the spread of ultra - long treasury bonds [9][50]

1. Report Industry Investment Rating There is no information provided regarding the report industry investment rating in the given content. 2. Core View of the Report Since the beginning of this year, the market has been concerned about banks' liability pressure and its impact on the bond market. In Q1, there was a loss of non - bank deposits and tight liquidity, and the significant adjustment in the bond market made banks want to sell some bonds in AC and OCI accounts to realize profits. In Q2, there have been new changes in banks' liability pressure and institutional behavior, along with changes in the central bank's liquidity injection attitude, asset expansion speed after the peak of government bond issuance, the attitude towards realizing floating profits at the end of the quarter, and the liability structure after the deposit rate cut. The report mainly discusses the impact of these changes on banks' bond allocation [2][5][11]. 3. Summary According to Related Catalogs 3.1. Season - end Banks' Asset - Liability Pressure is Controllable - **Asset Side**: In June, the incremental pressure of credit and government bonds is weaker than that in Q1. Historically, the bank's credit delivery rhythm is relatively front - loaded. Although June is a relatively large credit month within the quarter, its increment is generally less than that in January and March of the same year and shows a decreasing trend. As of the end of May, the cumulative net financing scale of special refinancing bonds this year has reached 1.56 trillion yuan, and the supply peak has passed [12]. - **Liability Side**: After the reduction of the deposit listing rate, there is a certain pressure of deposit "relocation", but the rhythm is expected to be smooth. The adjustment of manual interest compensation and the optimization of non - bank inter - bank deposit interest rates are mainly rectifications of unreasonable points and "blockages" in the interest rate transmission process, with a faster implementation progress and a more one - time impact on the pricing of short - term bond varieties such as inter - bank certificates of deposit. The reduction of the deposit listing rate is a normal market - oriented interest rate transmission process. Considering the fixed - term part of deposits and residents' asset allocation stickiness, the rhythm of deposit "relocation" and its impact on inter - bank certificates of deposit will be relatively slow [7][14]. 3.2. Asset - Liability Pressure is Moderate, and the Upper Limit of Inter - bank Certificate of Deposit Rate is Expected to be 1.7% - **Current Situation**: Since mid - to - late May, the yield to maturity of inter - bank certificates of deposit has gradually increased. The increase in the inter - bank certificate of deposit rate is due to the large maturity volume in June and the market's concern about the increased liability pressure of banks after the reduction of the listing rate. However, currently, the central bank's liquidity injection still shows a caring attitude, so the subsequent pressure on the inter - bank certificate of deposit rate may mainly focus on the issuance rhythm in June [7][32]. - **June Maturity and Issuance Rhythm**: The maturity volume of inter - bank certificates of deposit in June is about 4.2 trillion yuan, a historical peak, resulting from the superposition of 3M, 6M, and 1Y maturity pressures. It is expected that the issuance rhythm in June will be relatively front - loaded. The maturity volumes in the upper, middle, and lower ten - day periods of June are 0.92 trillion, 1.95 trillion, and 1.30 trillion yuan respectively. Banks will arrange their liability positions more proactively at the end of the quarter [39][43]. - **Interest Rate Outlook**: The capital market is expected to remain loose in June, and the central bank's liquidity injection shows a caring attitude. Although the inter - bank certificate of deposit may still face short - term upward pressure on yield, the upward space is limited, and the upper limit is expected to be around 1.7% [7][46]. 3.3. Banks' Operation of Realizing Floating Profits in Q2 is Expected to be More Stable - **Stronger Demand for Realizing Floating Profits during Bond Market Corrections**: When the bond market shows a continuous correction between quarters, banks have a stronger motivation to sell old bonds to realize floating profits. Since 2020, banks' net interest margins have continued to narrow, and the growth of handling fee income has also been under pressure. Banks pay more attention to the revenue contribution of the self - operated investment line. When the proportion of fair - value change gains and losses in revenue decreases significantly, the contribution of investment income to revenue generally increases or remains at a high level [50][51]. - **Relatively Low Demand for Selling Bonds in Q2**: From a long - term investment perspective, selling bonds means selling assets with a higher yield to maturity, which will lead to reinvestment pressure. In terms of the bond market trend, in April 2025, the 10 - year Treasury bond yield declined rapidly and then entered a narrow - range oscillation. The market trend change in early April provided a window for banks to realize profits, and the adjustment in May and June was weaker than that in Q1, so the pressure on banks' trading desks was relatively limited. Banks can also adjust the structure of self - operated investments to smooth the impact of bond market fluctuations on profits, such as reducing the proportion of TPL accounts [55][56].