Report Summary 1. Report Industry Investment Rating No information provided regarding the industry investment rating. 2. Core Viewpoints - Since August, the bond market has experienced a significant correction. Some investors use derivatives for interest rate risk hedging, and Treasury bond futures are a suitable hedging tool [2]. - Hedging can mitigate the decline/ rise risk of bond portfolios. However, it faces challenges such as basis convergence during the contract tenure and price differences from contract roll - over. The effectiveness of a single hedging is usually within 1 - 2 months [3]. - Overall, hedging is difficult to achieve perfect results but is effective in most cases, especially for large - scale bond portfolios or those with illiquid old bonds. It can control the impact on principal within about 1bp in the short - term (1 - 2 months), and dynamic adjustment of the hedging ratio can further reduce losses [9]. 3. Summary by Related Contents 3.1 Reasons for Treasury Bond Futures Hedging - If investors expect interest rates to rise and hold cash bond positions, they can short Treasury bond futures in advance for selling hedging; conversely, it is buying hedging [2]. 3.2 Challenges in Hedging - Hedging faces the problem of basis convergence during the contract tenure. For selling hedging investors, there may be basis losses. Also, contract roll - over brings price differences, causing losses to selling hedging investors [3]. 3.3 Steps in Treasury Bond Futures Hedging - The three steps are: selecting the term contract, calculating the hedging ratio, and dynamically adjusting the hedging ratio. Usually, the most liquid main contract is selected. There are two mainstream methods for calculating the hedging ratio: the cheapest - to - deliver (CTD) method and the statistical model method. The CTD method includes the basis point value method and the modified duration method [3]. 3.4 Hedging Results of Selected Bonds - In early August, 3 bonds (250007, 250011, 240011) were selected for hedging. Using the basis point value method, 240011 achieved a hedging gain of 235,100 yuan, while 250011 had a loss of 12,000 yuan, accounting for 0.012% of the principal [8]. 3.5 Hedging Optimization - The hedging can be optimized by introducing the β coefficient or dynamic position adjustment. If investors are highly certain about the bond market decline, they can increase short positions in Treasury bond futures [9].