Core Viewpoint - The key change in asset allocation for investors in 2023 compared to 2024 is an increase in risk appetite, driven by a strong performance in equity markets and upward pressure on nominal interest rates due to rising commodity prices [1][2] Group 1: Market Dynamics - Since early April 2025, equity assets have strengthened, leading to a diversion of funds from bond funds [1] - The rise in equity markets indicates a marginal improvement in macroeconomic conditions, while collective price increases in commodities have contributed to upward pressure on nominal interest rates [1] - The rally in cyclical and energy stocks has placed significant pressure on the bond market [1] Group 2: Bond Market Outlook - The central bank maintains a relatively loose monetary market environment, suggesting that interest rate volatility risks are manageable and bond market risks are limited [1] - Three core factors driving the bond market remain unchanged: 1. Price increases in upstream industrial products will not quickly transmit to downstream sectors 2. The real estate sector is still bottoming out, and a structural asset shortage persists 3. The monetary market environment remains accommodative, which is favorable for the bond market [1] - Recent economic data shows signs of recovery, with expectations that upstream industrial prices will eventually lead to a broad price index increase, which is already reflected in the recent stock and bond markets [1] Group 3: Fixed Income Investment Strategy - For the second half of the year, long-term and ultra-long-term bonds are expected to remain core assets in the bond market, with a low probability of unilateral interest rate increases [2] - When approaching the upper limit of the interest rate range, it may be advisable to extend duration and invest in long-term bonds [2] - In the credit bond sector, the current 4-5 year high-grade credit spread is at a historically low level, suggesting a strategy of shortening duration and selectively investing in lower-rated bonds [2] - Convertible bonds in sectors such as photovoltaic, solid-state batteries, and banks are recommended, as these sectors benefit from multiple favorable factors and the valuations of these convertible bonds are closely correlated with the performance of their underlying stocks [2]

Group 1 - The global banking industry is experiencing increasing anxiety, indicating potential systemic risks in the future [1] - Several regional financial institutions have reported significant losses, such as Japan's Norinchukin Bank, which posted a record net loss of 1.8078 trillion yen for the fiscal year 2024 due to misjudgments in interest rate movements [1] - The volatility in long-term bond rates is affecting various regions, including Taiwan, where multiple insurance companies have faced substantial losses due to rising overseas interest rates [1] Group 2 - Major institutions express pessimism about the U.S. economy, with JPMorgan CEO Jamie Dimon warning of potential cracks in the bond market due to excessive fiscal spending and quantitative easing [2] - Citigroup CEO Jane Fraser highlighted a three-phase impact of tariffs on the U.S. economy, indicating that the current phase involves businesses pausing investments and hiring due to rising uncertainty [2] Group 3 - Influential global banks, despite strong performance, are increasing provisions for credit losses, reflecting heightened caution regarding future economic uncertainties [3] - JPMorgan set aside $3.3 billion for potential loan losses, a 75% increase from the previous year, while HSBC raised its expected credit loss provisions by $202 million for Q1 2025 [3] - The concentration of the U.S. banking sector has significantly increased, with the top four banks accounting for 44% of the industry's profits, raising concerns about systemic risks if any major bank encounters issues [3] Group 4 - Although risks are currently concentrated overseas, it is crucial for China to proactively mitigate potential impacts, especially with low domestic bond rates [4] - The Chinese government is taking measures to stabilize the economy and enhance the resilience of financial institutions, such as increasing capital for state-owned banks and facilitating mergers among smaller banks [4] - The overall sentiment among international banks regarding future economic performance is one of uncertainty, which is particularly concerning given the current global economic weakness and escalating geopolitical tensions [5]