Group 1: Report Industry Investment Rating - No relevant content provided Group 2: Core Viewpoints of the Report - In 2025, the main changes in the trading volume and open interest of Treasury bond futures are the significant increase in the trading volume of ultra - long Treasury bond futures and the open interest of two - year Treasury bond futures. Short - duration Treasury bond futures have become the main hedging instruments this year. The hedging effect of short - duration Treasury bond futures is better, and the optimal hedging combination is a high - duration cash bond plus a low - duration Treasury bond futures hedging combination. The cross - variety arbitrage strategy performed well in the first half of 2025, while the timing strategy performed averagely. The combination of equal - weighted arbitrage and timing strategies effectively controlled the maximum drawdown and achieved good returns [1][2][10] Group 3: Summary by Directory 1. Market Overview and Basis - Spread and Inter - Delivery Spread Review - **Market Overview**: In 2025, the trading volume of ultra - long Treasury bond futures increased significantly, and the open interest of two - year Treasury bond futures increased substantially. The trading - to - open - interest ratio of short - duration Treasury bond futures decreased significantly. For example, the average daily trading volume of 30 - year Treasury bond futures in the first half of 2025 was about 110,000 contracts, an 87% increase from 2024. The open interest of two - year Treasury bond futures increased by 63% compared to 2024. Except for TL, the trading - to - open - interest ratio of Treasury bond futures decreased this year [10] - **Basis - Spread and Inter - Delivery Spread**: In the first half of the year, the IRR of Treasury bond futures first rose and then fell. The basis of TF and TS was significantly lower than that of the same period in 2024, and the TS basis fell into the negative range. The inter - delivery spread mainly declined during the roll - over period. The 2509 contract's inter - delivery spread is currently at a relatively low level in the same historical period, and the near - term contract still has positive - arbitrage space, putting some downward pressure on the inter - delivery spread [11] 2. Performance of Treasury Bond Futures Hedging Combinations - Different varieties of Treasury bond futures short - hedging combinations outperformed the buy - and - hold benchmark. The optimal hedging combination is a high - duration cash bond plus a low - duration Treasury bond futures hedging combination. For example, the TS hedging combination of the 5 - 7 - year Treasury bond index achieved an annualized return of 7.1%, a Sharpe ratio of 4.26, and a maximum drawdown of only 0.2%. Looking ahead, the short - hedging effect of short - duration Treasury bond futures is still promising, but the difference in carry among different varieties has significantly converged [33][34] 3. Analysis of the Performance of Treasury Bond Futures Quantitative Strategies 3.1 Treasury Bond Futures Timing Strategy Performance - The timing strategy is based on multi - factor models constructed by various factors affecting interest rates. The overall performance of the timing strategy in 2025 was volatile, with drawdowns in the first quarter. From 2022 to the present, the annualized return of the multi - variety equal - weighted net value in the rolling out - of - sample window was 6.7%, the Sharpe ratio was 1.71, and the maximum drawdown was 3.4%. The timing effect of ultra - long bonds was the best, while the performance of medium - and short - duration varieties was average [45] 3.2 Treasury Bond Futures Cross - Variety Arbitrage Strategy Performance - The cross - variety arbitrage strategy aims to remove unilateral risks by dynamically adjusting the portfolio. The strategy's returns come from interest - rate range fluctuations and Treasury bond futures basis carry. The cross - variety arbitrage strategy performed well in the first half of 2025. For example, the annualized return of the duration - neutral cross - variety arbitrage strategy between TS and T from 2022 to the present in the rolling out - of - sample window was 5.1%, and the Sharpe ratio was 1.63 [49] 3.3 Effect of Equal - Weighted Allocation of Timing and Cross - Variety Strategies - The combination of cross - variety arbitrage and timing strategies can significantly reduce the drawdown risk. Based on the equal - weighted allocation of the arbitrage and timing strategies, the maximum drawdown of the combination in the first half of 2025 was effectively controlled within 1.1%, with an annualized return of 6.3%, a Sharpe ratio of 2.02, and a Calmar ratio of 5.97. It is recommended to retain a certain proportion of cross - variety arbitrage strategies in the unilateral portfolio [52]

Report Industry Investment Rating No relevant content provided. Core Viewpoints - Short - term TS may continue to be weaker than T and TL due to weak market expectations for central bank interest rate cuts, high capital prices, weaker short - end spot and futures bonds compared to long - end, and the persistence of TS positive arbitrage and hedging strategies [1][35] - The current curve is extremely flat, short - end is significantly affected by capital pricing, and the short - end long - position driving force is limited before the capital price drops significantly [1][14] - Institutions such as funds short futures for hedging to offset interest rate fluctuation risks, and many institutions turn to coupon strategies [2][14] - TS positive arbitrage strategy is a key factor in the decline of TS, with the IRR of the cheapest - to - deliver bond in TS higher than the capital price and a continuous negative basis [3][27] - The main contract of TS is accelerating the switch from TS2506 to TS2509, and TS2506 may perform weaker [4][28] - The possible switch of the cheapest - to - deliver bond of TS2506 from 240024 to 250006 restricts the performance of TS2506 [5][33] Summary by Directory 1 TS in Decline - Since mid - March, the TS contract has been significantly weaker than TF/T/TL contracts. The T main - continuous contract price rose by 1.77% from March 17 to April 22, while the TS main - continuous contract price nearly dropped back to the mid - March low. TS also performed weaker than 2 - year treasury bond spot [12] - Reasons for the decline of TS: - The curve is extremely flat, short - end is affected by capital pricing, and the short - end long - position driving force is limited due to the obvious negative carry and slow decline of the capital price center [14] - Institutions such as funds short TS for hedging. In the current interest rate shock trend, many institutions turn to coupon strategies, and shorting TS can hedge part of the bond market decline risk. The net purchase scale of short - term interest - rate bonds by funds has slowed down since April, while the net purchase scale of short - term credit bonds has increased [2][14][20] - TS positive arbitrage strategy is a key factor. The IRR of the cheapest - to - deliver bond in TS is about 2.3%, significantly higher than the 1.75% - 1.80% return of 1 - year NCD [3][27] - The main contract is accelerating the switch from TS2506 to TS2509. The reasons may be that institutions such as brokers short TS2506 and long TS2509, and non - traditional investors such as funds mainly use TS2509 for hedging and positive arbitrage [4][28] - The possible switch of the cheapest - to - deliver bond of TS2506 from 240024 to 250006 restricts the performance of TS2506 [5][33] - Outlook: Short - term TS may continue to be weaker than T and TL. The 10 - year - 2 - year treasury bond term spread has reached the lowest point since 2020, and the probability of the short - end spot bond weakening significantly again is small [35]