Report Information - Report Title: Treasury Bond Daily Report [1] - Date: August 7, 2025 [2] - Researchers: He Zhuoqiao, Huang Wenxin, Nie Jiayi [3] Industry Investment Rating - Not provided in the report Core Viewpoints - Short - term: The market is concerned about the VAT collection on the interest income of newly - issued treasury bonds after August 8. Old bonds have a tax - exemption advantage, so there may be a rush to buy them this week. After the tax is imposed, new bonds may need to offer a tax compensation, leading to an increase in their yields. The impact on treasury bond futures is limited if the CTD remains old bonds [11]. - Long - term: Taxation mainly affects long - term bonds by about ten basis points. Since July, the market risk preference has increased, with the stock market rising, commodity prices warming up, and inflation expectations rising, which put pressure on the bond market. However, the bond market did not panic during the adjustment. The sustainability of the commodity and stock market rally is questionable, and the bond market may rebound in the short term. The bull - market foundation of bonds remains unchanged, and attention should be paid to economic data in August, especially on the domestic demand side [12] Section Summaries 1. Market Review and Operation Suggestions - **Market Performance**: Treasury bond futures fluctuated narrowly due to loose funds and the rebound of commodities. The yields of major interest - rate bonds declined slightly, with the 10 - year treasury bond active bond yield down 0.65bp to 1.6975%. The money market was stable and loose at the beginning of the month, with a net withdrawal of 1705 billion yuan through open - market operations [8][9][10]. - **Conclusion**: Short - term, the tax policy on treasury bond interest income may lead to a rush for old bonds. Long - term, the bond market is affected by the increase in risk preference, but the actual impact may be limited due to the uncertainty of economic recovery [11][12] 2. Industry News - The US may raise import tariffs on Indian products, and India will take measures to safeguard its interests. South Korea has obtained a promise from the US in the semiconductor and pharmaceutical industries. The global manufacturing PMI in July was 49.3%, down 0.2 percentage points from the previous month. Germany plans to launch a 1000 - billion - euro investment fund [13][14] 3. Data Overview - **Treasury Bond Futures Market**: Provides data on the trading of various treasury bond futures contracts, including prices, trading volumes, and positions [6] - **Money Market**: Shows the changes in SHIBOR, bank - to - bank repurchase rates, etc [29][33] - **Derivatives Market**: Presents the mean curves of Shibor3M and FR007 interest - rate swaps [35]

1. Report Industry Investment Rating - The rating for the bond market is "volatile" [4] 2. Core Viewpoints of the Report - Imposing VAT on treasury bond interest is bearish for the bond market in the long run. The theoretical negative impact on the 10Y treasury bond rate is about 10BP, but the actual impact should be less than the theoretical value [1][9] - The policy will cause price differentiation between new and old bond varieties in the short term, and existing bonds will gain a scarcity premium due to the tax - exemption advantage [1][9] - The policy will affect the CTD bonds of treasury bond futures, and the probability of CTD bond switching varies among different contracts [1] - The inter - period spread of treasury bond futures will be affected by the policy, and different strategies are recommended for different contracts [2][16][17] 3. Summary by Relevant Catalogs 3.1 Impact of Treasury Bond Interest Taxation on CTD Switching - **Policy Purpose**: The main purpose of imposing VAT on treasury bond interest is to improve the bond market price formation mechanism, and increasing fiscal revenue is a relatively secondary goal [8] - **Long - term Impact on the Bond Market**: After taxation, the coupon attractiveness of treasury bonds decreases, institutional bond - allocation willingness declines, and some funds flow to risk assets, leading to a decrease in bond - market sentiment. Newly issued bonds need to increase the coupon rate to compensate for the tax cost [9] - **Impact on CTD Bonds**: The CTD bonds of different contracts have different probabilities of switching to new bonds. For example, the CTD bonds of TL contracts are unlikely to switch; the 09 contracts of T, TF, and TS are also unlikely to switch; T2512 has a certain probability of switching; T2603 and TS2603 have a high probability of switching, and TF2603 has a certain probability of switching [1][12][15] 3.2 Impact of Treasury Bond Interest Taxation on Inter - period Spreads and Strategy Recommendations - **TL Contracts**: The spread of TL09 - 12 contracts has widened. The current spread has basically priced in existing factors, and subsequent trends are more affected by market sentiment. The spread is expected to rise in shock [16] - **T Contracts**: The T09 - 12 spread is high. A narrowing strategy has a certain cost - effectiveness, but continuous narrowing is not recommended. Short - term opportunities can be sought when the bond - market sentiment recovers [17] - **TF and TS Contracts**: The cost - effectiveness of the narrowing strategy for TF and TS09 - 12 contracts is lower than that of T contracts. If the market sentiment is weak, the inter - period spread may rise slightly [20][21] - **12 - 03 Contracts**: The arbitrage strategy for 12 - 03 contracts is not recommended. The 03 contracts have low liquidity, and the CTD bonds of most 2603 contracts have a high probability of switching to new bonds, resulting in a high theoretical central spread [26] - **Long - term Trend**: The central spread of inter - period spreads will gradually rise. The long - term upward logic of treasury bonds is changing, and the cost - effectiveness of going long on treasury bonds has decreased [27]

Policy Interpretation - The new tax policy on bond interest is not a "one-size-fits-all" approach, as it applies only to new bonds issued after August 8, while previously issued bonds remain tax-exempt, preventing panic selling among existing investors [2] - This strategy aims to increase future debt financing costs without causing immediate losses to current investors, reflecting a controlled and precise approach by the government [2] Tax Burden Impact - The 3% value-added tax may seem minor, but for large principal investors, the impact is significant. For instance, a holder of 1 million yuan in government bonds with a 3% annual interest rate will see a reduction in net income by 900 yuan due to the tax, resulting in an effective yield reduction [3] - For investors holding 10 million yuan in bonds, the annual loss could reach 9,000 yuan, which is comparable to several months' salary [3] Affected Groups - The policy primarily affects three groups: 1. High-net-worth bond investors, particularly retirees relying on bond interest for living expenses, who may face significant income reductions [4] 2. Financial institutions like banks and insurance companies, which hold large amounts of bonds and may respond by lowering deposit rates or raising loan rates, impacting the general public [4] 3. Local government financing platforms, which will see increased borrowing costs and may need to raise bond interest rates to attract investors, affecting fiscal expenditures and local tax structures [4] Underlying Reasons for Policy - The government is not merely responding to a cash shortage; the decision is influenced by several factors: 1. There is an objective fiscal pressure, with a budget deficit exceeding 6 trillion yuan for 2024, and while bond interest income is not substantial, it can help alleviate some fiscal strain [6] 2. The bond market has matured, reducing the need for tax exemptions to attract investors, as the market can self-regulate [6] 3. The restoration of tax on bond interest addresses tax equity, as other investment income types are taxed, promoting a fairer investment environment [6] Response Strategies - Investors are advised to consider three strategies in light of the new policy: 1. Purchase old government bonds issued before August 8 to benefit from tax-exempt interest [6] 2. Diversify asset allocation to reduce reliance on government bonds, considering other investment products for risk mitigation [6] 3. Focus on after-tax yield when evaluating investments, ensuring a rational comparison of different investment products [6] Deep Signals - The policy indicates a shift in macroeconomic policy, suggesting: 1. A tightening of previously loose monetary policies, with fewer favorable policies expected in the future [7] 2. The breaking of the "investment guarantee" perception of government bonds, requiring investors to reassess risk [7] 3. Increased pressure on asset depreciation due to inflation and reduced bond interest, necessitating sound financial planning to avoid potential losses [7]

Group 1 - The announcement from two national departments indicates that starting from August 8, 2025, interest income from newly issued government bonds, local bonds, and financial bonds will be subject to value-added tax again [1] - The decision to reinstate the tax is based on the current lack of necessity to encourage bond purchases through tax reductions and aims to adjust the funding structure to prevent excessive concentration of funds in interest-bearing bonds [1] Group 2 - Berkshire Hathaway reported a revenue of $92.515 billion for Q2 2025, a decrease from $93.653 billion in the same period last year [2] - The net income attributable to Berkshire shareholders fell to $12.370 billion, down 59% from $30.348 billion year-over-year [2] - Operating profit for Berkshire decreased by 4% year-over-year to $11.16 billion, primarily impacted by a decline in insurance underwriting business, while profits from railroads, energy, manufacturing, services, and retail sectors showed growth compared to the previous year [2] Group 3 - A recent study from Yale University revealed that as of July 31, the average effective tariff rate on imported goods in the U.S. reached 18.3%, the highest level in 91 years [3] - Consumers may face price increases of 40% for footwear and 38% for clothing in the short term due to these tariffs [3] - Concerns regarding the future of the U.S. economy were also highlighted in Berkshire's financial report [3]

1. Report Industry Investment Rating - The investment rating for treasury bonds is "oscillation" [4] 2. Core Viewpoints of the Report - This week, the sentiment in the bond market improved marginally. Looking ahead to next week, the overall liquidity will be balanced, and the equity market lacks catalysts for speculation, creating a favorable environment for the bond market. However, after the policy of levying VAT on treasury bond interest was announced, the bond market is expected to rise first and then fall [14]. - In the short term, the policy may cause price differentiation between new and old bond issues. In the long term, it is negative for the bond market as it reduces the attractiveness of treasury bond coupons, diverts funds to riskier assets, and requires new bonds to offer higher coupon rates [2][16]. 3. Summary by Directory 3.1 One - Week Review and Outlook 3.1.1 This Week's Trend Review - From July 28 to August 3, treasury bond futures fluctuated and rose. As of August 1, the settlement prices of the two - year, five - year, ten - year, and thirty - year treasury bond futures contracts were 102.352, 105.730, 108.450, and 119.090 yuan, up 0.026, 0.145, 0.255, and 0.970 yuan respectively from the previous weekend [13]. 3.1.2 Next Week's Outlook - The market is expected to rise first and then fall due to the policy of taxing treasury bond interest. It is recommended that trading positions gradually withdraw from long positions, consider short - hedging strategies for long - term bonds, and construct steepening curve strategies such as 10Y - 1Y if risk appetite is strong after key time points [2][16][19]. 3.2 Weekly Observation of Interest - Rate Bonds 3.2.1 Primary Market - This week, 92 interest - rate bonds were issued, with a total issuance of 6724.35 billion yuan and a net financing of 5532.57 billion yuan. The net financing of treasury bonds increased slightly, while that of local government bonds decreased, and the net financing of inter - bank certificates of deposit increased [17][19][20]. 3.2.2 Secondary Market - Treasury bond yields declined. As of August 1, the yields of 2 - year, 5 - year, 10 - year, and 30 - year treasury bonds were 1.42%, 1.57%, 1.71%, and 1.95% respectively, down 1.29, 5.66, 3.17, and 3.70 basis points from the previous weekend [25]. 3.3 Treasury Bond Futures 3.3.1 Price, Trading Volume, and Open Interest - Treasury bond futures fluctuated and rose. The trading volumes of 2 - year, 5 - year, 10 - year, and 30 - year treasury bond futures were 40590, 71737, 88205, and 156603 contracts respectively, with changes of - 6031, - 10064, - 14010, and + 366 contracts from the previous weekend. The open interests were 111227, 195029, 232880, and 160133 contracts respectively, with changes of - 7224, - 12580, - 6104, and + 3518 contracts from the previous weekend [34][37]. 3.3.2 Basis and IRR - The basis of futures generally fluctuated within a narrow range, and the IRR of the CTD bonds of each contract was between 1.4% - 1.8%. The current certificate of deposit rate is between 1.5% - 1.6%, so there are relatively few opportunities for cash - and - carry strategies [41]. 3.3.3 Inter - Delivery and Inter - Product Spreads - As of August 1, the inter - delivery spreads of the 2509 - 2512 contracts of 2 - year, 5 - year, 10 - year, and 30 - year treasury bond futures were - 0.042, - 0.055, + 0.025, and + 0.270 yuan respectively, with changes of + 0.040, + 0.005, + 0.040, and + 0.050 yuan from the previous weekend [44][46]. 3.4 Weekly Observation of the Liquidity Situation - This week, the central bank's net reverse - repurchase injection was 69 billion yuan. Interest rates such as DR007 and R007 declined slightly, and the average daily trading volume of inter - bank pledged repurchase decreased [49][51][53]. 3.5 Weekly Overseas Observation - The US dollar index strengthened, and the yield of 10 - year US treasury bonds declined. As of August 1, the US dollar index rose 1.04% to 98.6900, and the yield of 10 - year US treasury bonds was 4.23%, down 17 basis points from the previous weekend [58]. 3.6 Weekly Observation of High - Frequency Inflation Data - This week, industrial product prices fell across the board, and agricultural product prices mostly declined. As of August 1, the Southern China Industrial Product Index, Metal Index, and Energy and Chemical Index were 3680.14, 6362.56, and 1713.91 points respectively, down 143.52, 231.91, and 74.12 points from the previous weekend [62]. 3.7 Investment Recommendations - It is expected that the market will rise first and then fall next week. Trading positions are advised to gradually withdraw from long positions, pay attention to short - hedging strategies for long - term bonds, and consider constructing steepening curve strategies after key time points [2][16][19].