Group 1 - The overall bond market has shown a recovery trend since mid-January, with the 10-year government bond yield falling below 1.8%, leading to decreased buying intensity from major banks, while non-bank institutions still prefer leveraged arbitrage strategies [2][14] - The growth target for 2023 has been revised down to a range of 4.5%-5%, marking a more pragmatic tone in fiscal policy, with a fiscal deficit rate set at 4% [3][20] - The net financing of government bonds for the year is expected to be 13.83 trillion yuan, a decrease of about 200 billion yuan compared to last year, which may alleviate supply concerns [3][25] Group 2 - The actual fiscal deficit scale for 2025 is expected to be nearly 600 billion yuan lower than the target, with the realization of the 30.01 trillion yuan general public budget expenditure target in 2026 requiring a significant adjustment of 2.05 trillion yuan [4][36] - The central bank's monetary policy remains accommodative, with a significant amount of MLF and reverse repos injected into the market, maintaining liquidity despite a reduction in the scale of 3M reverse repos [5][40] - The 10-year government bond yield is expected to find support around 1.8%, and if liquidity remains ample, there may be opportunities for long-term bonds to recover after adjustments [8][14] Group 3 - The current economic environment is still in a seasonal downturn, with the February PMI below the growth line, but the marginal impact on the bond market is limited [6][59] - The recent decline in the 1-year policy bank bond yield to around 1.5% reflects both the controlled liability pressure on banks and the potential tightening of interbank deposit self-discipline [5][52] - The overall fiscal expenditure growth rate for 2026 is expected to be significantly lower than that of 2025, indicating potential downward pressure on fiscal policy [39][42]

1. Report Industry Investment Rating No relevant content provided. 2. Core Views of the Report - Geopolitical tensions, especially the escalation of the US - Iran conflict, have led to increased inflation concerns. Rising oil prices mainly affect PPI, with a relatively limited impact on CPI, and the long - term impact on the bond market is controllable, but short - term inflation expectations may cause fluctuations [1][25][33]. - The Two Sessions set a clear macroeconomic tone, including promoting high - quality development in the 14th Five - Year Plan, implementing proactive fiscal policies, maintaining moderately loose monetary policies, and strengthening financial supervision [34][38][39][42]. - In the bond market strategy, the short - end has limited downward space, while the long - end suggests holding existing assets and preferring elastic varieties for new funds [2][3][50][61]. 3. Summary by Relevant Catalogs 3.1 Geopolitical Driven Inflation Concerns 3.1.1 US - Iran Tensions and Market Volatility - The escalation of the US - Iran conflict has increased risk - aversion sentiment, causing significant fluctuations in the equity and commodity markets. Oil prices have soared, with Brent and WTI crude futures exceeding $90 per barrel. The CSI 300 has fallen 1.1%, and energy and defensive sectors have performed relatively well [11][13]. 3.1.2 Impact of Oil Prices on Inflation and the Bond Market - Oil prices mainly affect PPI, with a 10% adjustment in oil prices potentially driving a 0.35 - percentage - point change in PPI, and a relatively small impact on CPI (usually within 0.1 percentage points). If oil prices remain high, PPI may turn positive in April [15][16][22]. - In the long run, the impact of rising oil prices on the bond market is controllable, but short - term inflation expectations may cause fluctuations, especially when PPI breaks through critical points [25][29]. 3.2 Two Sessions Tracking 3.2.1 Macroeconomic Tone - The 14th Five - Year Plan focuses on high - quality development. The expected GDP growth rate of 4.5% - 5% is achievable. In consumption, there are measures for commodity and service consumption, as well as targeted policies for the sinking market. Investment will increase government investment and promote the construction of "six networks" and key areas. A national - level merger fund will be established to develop six new pillar industries and six future industries [34][35][37]. 3.2.2 Fiscal Policy - The proactive fiscal policy is reflected in both the scale of funds and policy synergy. In 2026, fiscal spending, new government bonds, and central - to - local transfer payments have reached new highs. A 100 - billion - yuan package of policies to promote domestic demand through fiscal - financial cooperation has been introduced [38]. 3.2.3 Monetary Policy - The moderately loose monetary policy will continue, with comprehensive use of short -, medium -, and long - term policy tools. The central bank will strengthen the implementation and supervision of interest rate policies, and the exchange rate is at a medium - level range. It is also studying a liquidity support mechanism for non - bank institutions in specific situations [39][40]. 3.2.4 Financial Supervision - Two measures will be introduced soon: deepening the reform of the Growth Enterprise Market and optimizing the refinancing mechanism. The goal is to guide industry institutions to focus on their main businesses and develop in a standardized way [42]. 3.3 Bond Market Strategy 3.3.1 Short - end Bonds - After the Spring Festival, the capital situation has remained loose, but the central bank's liquidity injection has been relatively restrained. The short - end bond market has limited downward space, with the 1 - year national and joint - stock bank certificates of deposit potentially reaching a "resistance level" at 1.55%. The credit spread of bonds with a maturity of less than 5 years has been compressed to a historical low [2][50][52]. 3.3.2 Long - end Bonds - The 10 - year Treasury bond is likely to remain within the range of 30 - 50bp above the OMO rate. The US - Iran situation may affect market risk appetite, and inflation expectations may rise due to rising oil prices. For coupon collection, convex - type bonds can be considered, such as 5 - year China Development Bank bonds for the medium - short term, 8 - year Export - Import Bank of China bonds for the long term, and 15 - 20 - year local government bonds for insurance funds. Existing assets can be held, and new funds can be invested in more liquid and elastic varieties [54][58][61]. 3.4 Interest - rate Bond Market Review 3.4.1 Capital Market - The central bank has significantly net -回笼 funds through OMO, but the capital market has remained balanced and loose [62][64][65]. 3.4.2 Primary Market Issuance - The net financing of Treasury bonds has decreased, while the net financing of policy - financial bonds, local government bonds, and inter - bank certificates of deposit has increased [75][77][78]. 3.4.3 Benchmark Changes - The term spreads of Treasury bonds and China Development Bank bonds have both widened, with short - end bonds performing better than long - end bonds [68][79][80].

Core Insights and Debt Market Strategy - The main trading logic this week includes limited incremental stimulus policies from the "Two Sessions," a significant rise in expectations for lower bank funding costs, and a PMI still in the contraction zone, providing marginal support for the bond market [9] - Expectations for lower bank funding costs support a stronger short-end market. The logic behind the short-end decline may extend beyond expectations of reserve requirement ratio cuts and interest rate reductions, as the market is pricing in expectations for lower bank funding costs [9][10] - The pricing in the bond market may be misaligned, with limited room for short-end speculation. The 1-year government bond yield is at a relatively low level, and the spread with DR007 has reached an extreme range, indicating potential overextension of easing expectations [9][10] Strategy Recommendations - It is advised to flatten the curve, maintain a defensive stance on the short end, and focus on opportunities in the 3-5 year range, which still has over 10 basis points of room to the take-profit point [10] - The current market scenario presents three potential scripts: 1) Spreads in the 3-5 year range compress to take-profit points before a pullback, 2) Rate cuts open up broader long positions, and 3) Overall pullback until new long opportunities arise [10] - The strategy for the upcoming market includes maintaining a defensive posture on the short end, moderately reducing positions in 1-year government bonds and city investment products, while considering a transition to 1-year AA- certificates of deposit [10] Weekly Summary - The short-end of the bond market led gains this week, with all maturities following suit. Although credit showed some upward momentum, most spreads widened, indicating potential profit-taking pressure [10] - The overall market outlook suggests a possibility of interest rate cuts and that adjustments in the bond market could present opportunities, leading to a slight bullish view in the short to medium term [10] Portfolio Recommendations - The recommended allocation for the week includes 20% in 3-year AAA-rated perpetual bonds, 30% in 5-year AAA-rated bank perpetual bonds, 30% in 1-year AA-rated certificates of deposit, and 20% in 3-year AAA-rated real estate bonds [12] - Since the beginning of 2025, the cumulative return of the weekly strategy is 3.45%, outperforming the short-term bond index return of 1.72% and the medium to long-term bond index return of 0.61% [12]

Summary of Conference Call Records Industry Overview - The records primarily focus on the bond market, particularly the dynamics of government bonds and credit bonds in the context of macroeconomic factors and geopolitical risks. Key Points and Arguments Interest Rate Trends - The current 10-year government bond yield is slightly below 1.8%, a level historically monitored by the central bank. If it effectively drops below 1.8% and approaches 1.7%, sustained bullish support will be necessary, with geopolitical risks potentially pushing rates lower, although the likelihood and necessity of this are limited. The more sustainable drivers are expectations of monetary easing or interest rate cuts [1][2][3]. - In the absence of domestic policy support, the 10-year government bond yield could reach a low of around 1.75% if geopolitical risks continue to escalate. If easing expectations rise around the Two Sessions, the yield could further decline to 1.7%, but this requires verification [2][3]. Short-term Interest Rates - The key constraint on short-term interest rates is whether the funding level will "step down." Currently, overnight rates are slightly below 1.4%, while 7-day rates are above 1.4%. The market remains sensitive, and the central bank is inclined to maintain stability and a slightly accommodative stance, leading to limited downward movement in short-term rates [4]. Credit Bonds and Investment Demand - Despite credit spreads not being "cheap," credit bonds may still hold allocation value, contingent on sufficient investment demand. For instance, potential openings in certain bond funds could create significant demand for 3-5 year credit bonds, enhancing their performance [5]. - In the long-end structure, 10-year policy bank bonds and 30-year government bonds are relatively more attractive due to existing spread opportunities. The likelihood of these spreads converging towards the 10-year government bond could lead to better performance during normal fluctuations [5]. Trading Strategies - The current 10-year government bond (220) has a spread of about 3 basis points over the 215 bond, which is considered reasonable. The discussion around whether a higher yield bond is more advantageous must consider the value-added tax implications [6]. - The 30-year government bond's trading strategy should prioritize active bonds over older ones, as the spread between them has not effectively compressed due to a lack of strong demand for 30-year bonds [7][8]. Future Expectations - The 30-year government bond's holding value may improve if certain suppressive factors change, such as expectations for nominal growth in 2026 weakening or if special government bonds are issued in the second quarter without significant impact on the 30-year segment [7]. - The bond market is expected to see a significant release of over 1,000 billion in amortized cost bond funds in March, which could increase demand for 3-5 year credit bonds [23]. Geopolitical Risks and Market Reactions - Geopolitical tensions typically lower risk appetite, leading to declines in risk assets and increases in safe-haven assets, which can push bond yields down. However, the long-end rates have limited downward space [2][3]. Conclusion - The bond market is currently influenced by a mix of geopolitical risks, domestic policy expectations, and market dynamics. Investors are advised to monitor these factors closely, particularly around the Two Sessions, as they may present trading opportunities in both credit and government bonds [24][25].

Group 1 - The report emphasizes a cautious investment strategy due to rising external geopolitical risks, suggesting a focus on stability in the market [3][12] - In the bond market, there is an expectation of limited adjustment risks, with a forecast for the ten-year government bond yield to fluctuate around 1.8% [3][12] - The stock market is advised to focus on large-cap blue-chip and cyclical sectors, with a recommendation to monitor indices such as CSI 300, CSI 500, and CSI 1000 for potential opportunities [3][12] Group 2 - The report highlights a significant increase in domestic tourism during the Spring Festival, with 596 million trips taken and total spending reaching 803.48 billion, marking a historical high [9] - Recent policy adjustments in Shanghai aim to optimize housing regulations, including reducing purchase restrictions and improving housing loan policies [9] - The report notes that external factors, such as military actions in the Middle East, are impacting market sentiment and leading to increased volatility in overseas markets [10]

Group 1 - The report indicates that the bond market experienced a recovery in January, with yields initially rising before declining throughout the month, driven by a lack of negative trading factors and improved market sentiment [5][10] - The focus for February is on medium-term credit bonds, particularly those with maturities of 2-3 years, as demand is expected to increase following the stabilization of fund liabilities [11][12] - The report highlights that the issuance of corporate perpetual bonds decreased significantly in January, with a total of 68 bonds issued, raising 55.6 billion yuan, a drop of approximately 68% from the previous month [18][19] Group 2 - In the secondary market, the yield spread for perpetual bonds narrowed slightly, with city investment bonds performing better than industrial bonds [29][31] - The report notes that the average yield of various grades of perpetual bonds decreased by about 4 basis points in January, with city investment bonds showing a more significant decline [30][34] - The analysis indicates that the issuance of Asset-Backed Securities (ABS) halved in January, with financing costs declining across the board, suggesting a stable outlook for future issuance [14][40]

Core Insights - The report addresses three main issues: recent bond market review, changes in institutional behavior, and future outlook for the bond market [2] - The bond market is undergoing a transformation characterized by a dual behavior of institutions [3] Group 1: Institutional Behavior Changes - The supply side pressure is evident with local government bond issuance expected to reach 1.94 trillion yuan in Q1 2026, with high issuance volumes in January and March [5] - The demand side shows a deterioration in traditional allocation demand, with major banks and insurance companies showing decreased willingness to absorb long-term bonds [5] - The trading side indicates a shift where rural commercial banks are retreating while brokerages are becoming more active, particularly in trading 10Y and 30Y bonds [16][17] Group 2: Supply and Demand Dynamics - The issuance plan for government bonds in Q1 2026 is heavily concentrated in February and March, with various maturities being offered [6] - The report highlights that large banks are focusing on realizing profits from older bonds, while insurance institutions are primarily buying local bonds instead of national bonds [7] - The trading volume remains low, and the volatility is expected to decrease further as banks increase their trading in 10Y bonds [23] Group 3: Future Market Outlook - The report suggests that the bond market may experience further adjustments, with brokerages likely to increase their trading of long-term bonds [13] - There is a notable pressure for profit-taking among joint-stock banks, particularly in 10Y national bonds, which may influence future trading strategies [14] - The report anticipates that the yield spread between 30Y and 10Y bonds may widen, while the spread between 10Y national bonds and national development bonds may narrow [23]

1. Report Industry Investment Rating No information about the report industry investment rating is provided in the content. 2. Core Viewpoints of the Report - In December 2025, bond market yields oscillated and then trended upward, with a term - structure differentiation. The 10 - year Treasury yield rose 2BP, and the 1 - year Treasury yield fell 5BP. The term spread widened by 7BP to 51BP [1][8]. - In January 2026, focus on the 2025 GDP performance and the possibility of a Q1 economic start, the potentially active front - loading of supply, the possibility of central bank reserve requirement ratio cuts and flexible and cautious interest rate cuts, and the opening of the seasonal interest rate downward window and institutional net - increase support for the start - of - the - year [4][76]. - The bond market interest rate is expected to oscillate downward in January. It is recommended to actively seize the opportunity to enter the market when the interest rate oscillates downward, and also pay attention to the opportunity of narrowing the spread of ultra - long bonds [5][77]. 3. Summary According to the Directory 3.1 Bond Market Review - In December, affected by factors such as the central bank's precise liquidity care, loose funds, and repeated disturbances of interest rate cut expectations, the bond market yield oscillated and then trended upward. There was term - structure differentiation, with the 10 - year Treasury yield rising 2BP and the 1 - year Treasury yield falling 5BP. The term spread widened to 51BP [1][8]. - The yield curve of Treasury bonds in December was overall bull - steep, with the decline of the medium - and short - term generally larger. The implied tax rate of China Development Bank bonds rose overall [9]. - Overseas, the US inflation repair was less than expected. The Fed cut interest rates in December, but there were still large internal differences. The US bond yield trended upward, and the Sino - US interest rate spread inverted slightly widened. The US dollar against the RMB exchange rate declined [10]. - Weekly, the bond market yield first rose and then fell in the first week, declined overall in the second week, continued to decline in the third week, and oscillated and rebounded in the fourth week [17]. 3.2 This Month's Outlook and Strategy 3.2.1 Bond Market Outlook - **Fundamentals**: Pay attention to the improvement of inflation (CPI's moderate recovery and PPI's continuous positive month - on - month growth), the resilience of exports under high - base effects and its support for PMI, the decline of real estate supply and demand data, and the 2025 GDP growth rate and the possibility of a 2026 economic start. If the weak fundamental recovery continues, the upward market expectations may reverse [2][21]. - **Supply**: The 2025 deficit rate may remain at 4%, with the quotas of Treasury bonds and special bonds increasing. It is estimated that the net supply of government bonds in January will be about 1.24 trillion yuan, mainly due to more special bond issuances. The overall supply pressure has increased compared with the same period in 2025 [2][38]. - **Funds**: At the end of the year, the central bank clearly cared about cross - year liquidity, and the funds were loose recently. Although the liquidity may be under pressure due to factors such as the front - loading of government bond issuance and a large certificate of deposit maturity scale, it is expected that the bond market funds in January will fluctuate in a balanced manner, and the interest rate is likely to decline seasonally after the Gregorian New Year. Pay attention to the possibility of the central bank increasing Treasury bond purchases [3][51]. - **Policy**: The December economic meeting pointed out the policy direction for 2026. It is expected that reserve requirement ratio cuts and more flexible and cautious interest rate cuts are likely to be implemented in the first quarter to cooperate with fiscal efforts. More flexible tools can be expected next year [3][61]. - **Institutional Behavior**: In December, various institutional allocation portfolios continued to increase holdings but slightly converged, and trading portfolios turned to small - scale net purchases. In January, focus on the opening of the traditional interest rate downward window, the possibility of allocation forces increasing positions before the Spring Festival, the possibility of trading portfolios entering the market flexibly, and the opportunity of narrowing the spread of ultra - long bonds [3][65]. 3.2.2 Bond Market Strategy - In January, focus on the 2025 GDP performance and the Q1 economic start, the potentially active front - loading of supply, the possibility of central bank reserve requirement ratio cuts and flexible and cautious interest rate cuts, and the opening of the seasonal interest rate downward window and institutional net - increase support for the start - of - the - year [4][76]. - In terms of interest rates, the funds in January are likely to return to a balanced state after the cross - year under the central bank's care. There is room for the central bank's Treasury bond trading operations and reserve requirement ratio cuts. It is recommended to actively seize the opportunity to enter the market when the interest rate oscillates downward. For the short - end, the short - end interest rate has limited odds for short - term returns. For the long - end, the current 1.85% has reappeared allocation value. For ultra - long bonds, pay attention to the opportunity of narrowing the spread if the market conditions are favorable [5][77]. 3.3 January Important Economic Calendar The report provides the expected values of important economic indicators to be announced in January, including PPI, CPI, M2, new RMB loans, and other data [80].

Group 1 - The central viewpoint indicates that the central bank's monetary policy is expected to remain accommodative, with a low probability of interest rate cuts in the near term, although the likelihood may increase after the Spring Festival [1] - Short-term government bond yields are anticipated to have limited downward space, while the overnight rate is expected to slightly rebound, and the 7-day funding rate is likely to remain stable [1] - Long-term interest rates may have opportunities for decline in January if economic performance is strong and short-term rates stabilize at low levels; however, if equity markets perform well, long-term rates may rise above 1.9% [1][2] Group 2 - In January, the bond market strategy should focus on four key points: limited downward space for short-term government bond yields, potential opportunities in short-term credit and medium-term government bonds, and the capital gain value of long-term active bonds being weak [2] - The high spread between new and old long-term bonds suggests that holding higher-yield long-term bonds may be beneficial if short-term fluctuations are not a concern [2] - The supply of local government bonds is significant, and attention should be given to the spread between local and national bonds before making investment decisions [2] Group 3 - As of December 26, 2025, the National Development Bank bond ETF (159651) showed a slight increase of 0.02%, with a latest price of 106.85 yuan and a turnover rate of 5.11% [3] - The ETF has a maximum drawdown of 0.12% over the past six months, which is the smallest among comparable funds, indicating strong performance in terms of risk management [3] - The management fee of the National Development Bank bond ETF is 0.15%, and the tracking error over the past two months is 0.007%, which is the highest precision among comparable funds [4]

Group 1 - The core viewpoint of the article emphasizes that the market will continue to exhibit characteristics of stock game under a low interest rate environment, with a focus on tracking the indicators and position changes of allocation and trading accounts to better understand market congestion and short-term direction [1] - The analysis highlights that institutional behavior, particularly from allocation institutions, has significantly impacted market volatility this year, with a noted lack of willingness to hold long-term bonds due to interest rate risks [1][2] - The article suggests that the demand for long-term bonds will likely remain weak next year, influenced by the insurance institutions' lower willingness to allocate to long-term government bonds and the overall supply-demand dynamics in the market [2] Group 2 - The expected core strategy for interest rate bonds next year is described as "defensive counterattack," with a forecast that the ten-year government bond yield will fluctuate between 1.5% and 2.0%, and the yield curve is likely to steepen [3] - Key trading opportunities are identified based on three expected discrepancies: narrative consensus, policy expectations, and liability tracking, which will influence the performance of related bond products [3] - The article recommends focusing on the ten-year government bond ETF (511260) as it offers both allocation and trading value, with expectations of good returns for investors by 2026 [4]