Report Industry Investment Rating - No relevant content provided Core Viewpoints - The current bond market decline features stable short - term bonds and widening term spreads. The adjustment is due to the disappointment in 2024 expectations and the change in the macro - narrative. As the bond and stock markets have gradually become desensitized since late August and entered the August economic data window period, the trading focus of the bond market is expected to shift to fundamentals, and the bond market is expected to rebound from the oversold level in the short term. Attention should be paid to the August economic growth data released on September 15 [2] Summary by Related Catalogs Review of the Bond Market Decline - The upward adjustment of bond yields started at the end of June. From June 30 to September 10, almost all bond yields rebounded significantly, with an average increase of 12BP (only the 3 - year AA - variety yield decreased by 5BP). Long - term bonds had a more significant increase, with the average increase of treasury bonds, government - sponsored bonds, and local government bonds being 15BP, 17BP, and 11BP respectively. The 30 - year treasury bond yield increased by 34BP. Most credit spreads narrowed, with an average narrowing of 5BP, and the narrowing of low - grade credit spreads was more significant [3] Reasons for the Bond Market Adjustment - The adjustment is mainly due to two reasons: the disappointment in 2024 expectations, as the 7 - day reverse repurchase rate in 2025 was only cut by 10BP, less than the average cut of over 20BP in the past three years, and the GDP growth rate in the first half of 2025 was better than the pessimistic expectations at the end of 2024; and the change in the macro - narrative, including the anti - involution movement dispelling deflation expectations and the strong performance of the stock market leading to the redemption of bonds [2][6] Desensitization of Bond and Stock Markets - From August 18 to September 8, the bond market was mainly sideways, while the stock market rose (CSI 300 rose 5.4% and CSI 500 rose 4.9%). The correlation between bonds and stocks weakened compared with July. The trading rhythm of the bond market began to lead the stock market to some extent. The bond market is gradually desensitizing to the stock market, which is related to the structural differentiation of the stock market's rise. The performance of A - share industries has been significantly different this year, and the stock market's sharp rise does not mean a comprehensive improvement in the Chinese economy [9][10] Bond Market Outlook - The trading focus of the bond market is expected to return to fundamentals. Historically, important turning points in the bond market often occur during the release of economic data. The current economic fundamentals are still weak, and the GDP growth rate in the third quarter is expected to decline. The bond market is expected to rebound from the oversold level in the short term. Attention should be paid to the August economic growth data released on September 15 [2][16][20]

Market Review - The bond market in 2025 is characterized by a gap between expectations and reality, particularly regarding the anticipated "moderate easing" monetary policy that did not materialize as expected [2][12][15] - The macroeconomic narrative has shifted, with a focus on combating "involution" and promoting high-quality development, as highlighted by various government initiatives [21][25] - The economic environment remains cold, with GDP growth in the first half of 2025 recorded at 5.3%, indicating a stabilization after three consecutive quarters of improvement [15][60] Investment Strategy - The strategy emphasizes short-term positioning while engaging in long-term trading, with a focus on the 10-year government bond yield fluctuating between 1.6% and 1.9% [110] - The bond market is expected to experience a weak overall trend with potential for rebounds, driven by the accumulation of realistic market expectations [65][69] - The current bond market participants are increasingly unstable, with a notable rise in individual investors holding public bond funds, which increased by 3.6% to 7.6% in the first half of 2024 [82][83] Bond Market Dynamics - The yield curve has shown a widening in term spreads, with the 10-1 year government bond spread at 43 basis points and the 30-10 year spread at 28 basis points as of September 3, 2025 [71][73] - The absolute level of interest rates remains low, with credit spreads for major bond varieties at historical lows, indicating a crowded secondary market with low coupon rates [93][104] - Historical data shows that years with a flat yield curve have occurred 67% of the time since 2010, suggesting a tendency for bond markets to rise during such periods [99][100]