1. Report Industry Investment Rating - Not provided in the given content 2. Core Viewpoints of the Report - The reasons for the current adjustment in the convertible bond market include potential reduction of equity - related asset allocation by fixed - income plus investors, a significant amount of profit - taking by absolute - return investors, and the high valuation triggering partial profit - taking indicators [1][7] - The probability of an over - adjustment in the convertible bond market is high, and the bond - selection space has returned to the level of mid - to early August. It is recommended to participate in the market, tilt towards equity - biased convertible bonds, and adjust the mid - and low - priced structure [2][10][12] 3. Summary by Relevant Catalogs 0827 Market Review and Analysis of Adjustment Causes - On August 27, 2025, the convertible bond market experienced a significant adjustment. The CSI Convertible Bond Index dropped 2.82%, and the median closing price of convertible bonds decreased by 2.85 percentage points to 132.32 yuan, while the median implied volatility fell 5 percentage points to 37%. The 100 - yuan premium rate remained relatively stable [5] - The reasons for the adjustment are that fixed - income plus investors may reduce equity - related asset allocation, absolute - return investors may have a large number of profit - taking positions, and the high valuation may trigger partial profit - taking indicators [1][7] The High Probability of Over - adjustment in the Market and the Emerging Opportunities - The probability of an over - adjustment in the convertible bond market is high, and the bond - selection space has returned to the level of mid - to early August. The equity market still has potential as an important date approaches, and the trading volume remains stable. The adjustment has expanded the bond - selection window for convertible bonds below 125 yuan and 130 yuan, and the space for high - gamma convertible bonds has also increased. The confidence of market investors in the convertible bond market is relatively strong [2][10] - After the adjustment, it is recommended to maintain participation, tilt towards equity - biased convertible bonds, and adjust the mid - and low - priced structure. High - priced equity - biased convertible bonds may have better value if the equity market rises. Mid - and low - priced convertible bonds are not cheap, and there may be greater valuation fluctuations. For mid - and low - priced bond allocation, it is recommended to focus on targets with debt - resolution needs and capabilities [2][12][13] - The convexity strategy has played a relatively anti - decline role. From August 25th to 27th, the net value of the convexity strategy continuously outperformed the CSI Convertible Bond Index, with an excess of about 0.64 percentage points on the 27th [13]

Summary of Conference Call Notes Industry Overview - The notes primarily discuss the bond market in China, focusing on the impact of government policies and market strategies related to bond issuance and liquidity management [1][2][3]. Key Points and Arguments 1. **Economic Policy and Market Conditions** - The current economic environment is characterized by a cautious approach to policy, with the second quarter showing potential volatility that remains unverified [1][2]. - The issuance of bonds, particularly local government special bonds and short-term special treasury bonds, is expected to increase, which may create pressure in the primary market [1][2]. 2. **Monetary Policy Focus** - The monetary policy is shifting towards supporting the real economy and structural adjustments, relying more on structural tools like relending rather than traditional methods such as rate cuts [3][6][7]. - This approach aims to avoid excessive loosening that could lead to financial risks [6][7]. 3. **Market Strategy Recommendations** - For interest rate allocation, a bullet strategy is recommended, while a barbell strategy is suggested for credit allocation to mitigate risks and enhance returns [4][10]. - The emphasis on short-duration bonds is due to the reduced risk associated with them, especially in light of the anticipated increase in local government bond issuance [4][14]. 4. **Impact of Bond Issuance on Market** - The large-scale issuance of special treasury bonds and local government bonds is expected to exert significant pressure on the primary market, potentially leading to a situation where secondary markets outperform primary markets [5][13]. - Institutions may shift to the secondary market due to discomfort with the large volume of bonds held [5][13]. 5. **Liquidity and Investment Strategies** - Current liquidity in the bond market is somewhat weak, but strategies such as selling near issuance prices can yield returns [17]. - The supply of local bonds and central enterprise bonds is increasing, while city investment bonds face regulatory challenges, affecting their market dynamics [18]. 6. **Market Sentiment and Investment Strategy** - Market sentiment significantly influences investment strategies; a smooth downward trend favors long-term bonds, while uncertain conditions may require simpler, effective strategies [19]. - The sentiment around credit spreads has improved, indicating a better value proposition for credit strategies [19]. 7. **Performance of Fixed Income and Convertible Bonds** - Recent performance of fixed income and convertible bonds has shown stability, with public funds and insurance companies reducing their positions in convertible bonds due to high valuations [20][21]. - The convertible bond ETF has stabilized after previous redemption phases, with expectations of improved sentiment as the equity market stabilizes [23]. 8. **Comparative Analysis of Market Performance** - The bond market's performance in 2024 was poor due to declining equity markets and credit rating downgrades, while 2025 shows signs of stabilization and potential recovery [25][26]. - Recommendations for 2025 include a balanced approach of defensive and offensive strategies, focusing on low-risk and undervalued assets alongside sectors like electronics and agriculture [27]. Other Important Insights - The anticipated exit of platforms post-2027 is a critical concern for liquidity and credit risk in local government financing [16]. - The current market dynamics suggest a preference for long-duration bonds with high ratings, as they are expected to perform better in the current environment [12]. This comprehensive analysis highlights the intricate relationship between government policy, market strategies, and economic conditions affecting the bond market in China.