Group 1 - Understanding the reasonable pricing of the bond market may require comprehension of the overdrawn market conditions in December 2024, where the 10-year government bond yield dropped from 2.02% to 1.68%, a decrease of 35 basis points, indicating a significant overdraw [7][8] - The financial system's lack of long-term capital is a key issue, with the proportion of government bonds with maturities over 7 years increasing from 33% in 2021 to over 43% in 2025, while the growth of long-term capital in the financial system has not kept pace [11][12] - The current bond market's characteristics can be understood through a game-theoretic perspective, where the slow duration reduction may be influenced by market sentiment, leading to a disconnection between market performance and fundamentals [14][15] Group 2 - The recent growth in credit bond ETFs is driven by policy support, with the scale reaching 485.9 billion yuan by the end of September 2025, and the second batch of 14 technology innovation bond ETFs launched, indicating a trend towards expansion [22][23] - The resilience of credit bonds in the third quarter can be attributed to a favorable funding environment, investor reluctance to sell, and the expansion of credit bond ETFs, with expectations for continued fluctuations in credit spreads in the fourth quarter [25][26] - The "Southbound Bond Connect" policy is expected to enhance the liquidity of offshore bonds, with the recent regulatory changes allowing for increased issuance and trading of offshore bonds, which may provide investment opportunities in high-quality local government bonds and international institution bonds [28]

Core Insights - Understanding the reasonable pricing of the bond market may require comprehending the overdrawn market conditions expected in December 2024 [11][12] - The financial system's lack of long-term capital is a significant concern, with potential solutions including reserve requirement cuts and central bank purchases of long-term bonds [16][17][18] - The current bond market characteristics can be interpreted through a game-theoretic lens, where market sentiment may decouple from fundamentals and liquidity [19][20] - The steepening of the yield curve indicates a potential shift in the mid-term logic of the bond market, influenced by factors such as anti-involution policies and the relative attractiveness of equities [27][28] - The growth of credit bond ETFs is notable, with structural demand expected to persist, although short-term spread compression may be limited [29][30] - The resilience of credit bonds in Q3 can be attributed to a favorable funding environment and investor reluctance to sell, with expectations for continued volatility in Q4 [32][33][34] - Recent policies regarding the "southbound bond connect" are expected to enhance the liquidity and attractiveness of offshore bonds [36] - The convertible bond market is anticipated to see excess returns primarily from sectors with strong growth narratives, such as AI and humanoid robotics [37][38] - The current strategy for convertible bonds emphasizes equal-weighted allocations with a focus on high-growth individual securities [38] - The convertible bond market presents both risks and opportunities, with institutional actions providing potential entry points during market corrections [40] Summary by Sections Understanding Reasonable Pricing in the Bond Market - The divergence between long-term interest rates and funding rates since May is largely attributed to the anticipated overdrawn conditions in December 2024 [11][12] Financial System's Lack of Long-Term Capital - The steepening yield curve since Q3 is linked to the financial system's insufficient long-term capital, exacerbated by high government bond supply and strong equity market performance [16][17] Game-Theoretic Understanding of the Bond Market - The slow adjustment of duration in the current bond market reflects a game-theoretic mindset among investors, impacting the relationship between market behavior and underlying fundamentals [19][20] Mid-Term Logic Shift in the Bond Market - The bond market is likely to face a mid-term logic shift starting in 2025, driven by anti-involution policies and changing investor preferences between equities and bonds [27][28] Growth of Credit Bond ETFs - The expansion of credit bond ETFs is supported by regulatory changes and a low-interest environment, with expectations for continued growth in scale and number [29][30] Q3 Credit Bond Resilience and Q4 Outlook - The strong performance of credit bonds in Q3 is attributed to a favorable funding environment and investor behavior, with expectations for continued fluctuations in Q4 [32][33][34] "Southbound Bond Connect" Policy Implications - Recent policy developments regarding the "southbound bond connect" are expected to improve the liquidity and attractiveness of offshore bonds, enhancing market dynamics [36] Convertible Bond Market Insights - The convertible bond market is expected to see excess returns from sectors with strong growth potential, with a focus on strategic allocations [37][38] Convertible Bond Strategy - The recommended strategy for convertible bonds involves equal-weighted allocations while emphasizing high-growth individual securities for enhanced returns [38] Risks and Opportunities in the Convertible Bond Market - The convertible bond market presents both risks and opportunities, with institutional actions creating favorable entry points during market corrections [40]