Group 1: Report Highlights - The report is the first part of the "Local Government Bond Investment Guide" series, observing the investment value of local government bonds from the perspectives of primary market issuance characteristics and secondary market trading characteristics [4]. - In recent years, the issuance rhythm of local government bonds has shown a significant end - of - month rush, with a gradually market - oriented pricing mechanism, anchoring the Treasury bond yield and the interest rate being close to the bidding lower limit, but there are "flying" phenomena in a few regions. - Local government bonds show anti - decline attributes during the adjustment period, and their allocation value is prominent in the interest rate downward cycle. There are obvious floating profit differentiations among regions, with smaller arbitrage spaces in economically developed regions and higher probabilities of floating profits in special refinancing bonds and regions with low "flying" rates [4]. Group 2: Report Industry Investment Rating - No investment rating information is provided in the report. Group 3: Core Views - The issuance rhythm of local government bonds is highly coordinated with policy guidance. From 2018 - 2024, the completion rate of the Ministry of Finance's guidance on the issuance time of special bonds exceeded 95%, and in years with strong policy statements, the end - of - month issuance completion rate was close to 100%. There is a significant end - of - month concentrated issuance pattern, with the average issuance volume in the second half of each month from 2021 - 2024 accounting for 75%, and in most months, the issuance volume in the last five days accounts for over 25% of the monthly total [6]. - The pricing mechanism of local government bonds has evolved over four key stages in the past decade. Currently, 89.5% of the local government bonds issued in 2024 still use the Treasury bond yield as the sole pricing benchmark, and the "Treasury bond + local government bond yield curve" dual - anchor model piloted in Shenzhen provides a practical sample for regional innovation. Most local government bonds are issued at the lower limit of the bidding range, with only a few showing significant "flying" phenomena. The term spread structure is significant, with the issuance spread of bonds over 10 - year terms being 8bp higher on average than that of 2 - 7 - year varieties from December 2024 to January 15, 2025 [7]. - Different types of institutions have different allocation strategies. Commercial banks' comprehensive returns on general and special bonds are slightly lower due to capital occupation for credit risk weighting, while public funds are more competitive without such constraints and enjoying tax preferences. Institutions' operations during adjustment and non - adjustment periods are significantly different, and the post - listing valuations of general and special bonds are still differentiated [8]. - Local government bonds show unique risk - return characteristics in the interest rate cycle. Their defensive attributes were stronger than Treasury bonds from October 2022 to September 2023, but their offensive attributes increased and the volatility was higher than Treasury bonds since September 2023. In 2024, local government bonds had the smallest adjustment range and the strongest anti - decline ability during multiple adjustments, and there were significant differences in floating profits and losses among regions. In 2024, the proportion of coupon income of short - end bonds decreased, and the proportion of riding income increased significantly [9]. Group 4: Summaries by Directory Local Debt Issuance Rhythm Follows Guidance - The issuance progress of new special bonds each year generally meets the requirements of the guidance, and most of the issuance work is completed before the guiding month. In 2018 - 2021, the actual issuance completion rate was mostly higher than 95% by the end of the guiding month. In 2024, the issuance progress of about 290 billion yuan of special bonds was close to 100% by the end of October [18]. - There is a significant end - of - month rush in the issuance of new special bonds. From 2021 - 2024, the issuance volume in the second half of the month was significantly higher than that in the first half. In 2024, the second - half issuance accounted for 79% of the annual total, and for local government bonds in general, there was a peak supply at the end of the month, with the issuance proportion from the 26th to the 31st of each month in 2024 accounting for more than 25% of the monthly total [23]. Gradual Marketization of Local Debt Primary Pricing - The pricing of local government bond issuance has gradually moved away from the fixed spread model and towards a more market - oriented direction, going through four stages: the market exploration stage (2015 - 2018), the administrative spread constraint stage (2018 - 2021), the lower - limit breakthrough pilot stage (2021 - 2022), and the yield curve anchoring stage (2022 - present). Currently, the overall spread has gradually declined to below 10bp [7]. - Most bonds are still anchored to the Treasury bond yield curve, and only Shenzhen bonds use a dual - pricing mechanism. Among the 200 local government bond sub - samples issued in 2024, 89.5% are anchored to a single curve, and the upper - limit expression of most bonds shows a certain concentration, with the proportion of bonds with an upper limit of 30% above the Treasury bond yield average being the largest [30]. - In 2024, the range of the arithmetic mean of primary spreads among regions could exceed 7bp. The "flying" degree varies among regions, with some regions having a high average "flying" index and some economically developed regions having no "flying" phenomenon. There have also been cases of postponed bond issuances [40]. - China's local government bonds mainly use Dutch auctions. High - flying - index bonds generally have weak demand but may have extreme heat due to liquidity premiums, low - flying - index bonds have stable demand, and medium - flying - index bonds have highly volatile demand due to divided subscription expectations [45]. - From December 2024 to January 15, 2025, the issuance spreads of local government bonds over 10 - year terms increased significantly, while those of 2 - 7 - year bonds decreased slightly. The primary spread of local government bonds is related to the Treasury bond yield and its own liquidity premium [52]. Differentiated Institutional Behaviors and Market Liquidity Structure - Commercial banks need to account for capital occupation costs when investing in bonds, resulting in lower comprehensive returns on general and special bonds. Public funds are more competitive without such constraints and enjoying tax preferences [67]. - In the local government bond market, insurance companies continuously increase their holdings during non - adjustment periods and increase their holdings counter - cyclically during adjustment periods. Banks, funds, and securities companies have different trading behaviors during adjustment and non - adjustment periods, and the net purchases of each institution during adjustment periods are significantly differentiated [71]. - Theoretically, the yield of special bonds should be higher than that of general bonds. After listing, the valuations of general and special bonds are still differentiated, indicating that the market has implicit pricing differences for factors such as liquidity [79]. Evolution of Risk - Return Characteristics and Strategy Selection - From 2022 - 2023, local government bonds showed stronger defensive attributes than Treasury bonds in the first bull - bear market but stronger offensive attributes in the second one. In 2024, local government bonds had a smaller adjustment range and stronger anti - decline ability during multiple adjustments, and there were significant differences in floating profits and losses among regions [9]. - In 2024, the proportion of coupon income of short - end bonds decreased, and the proportion of riding income increased significantly, reflecting the decline in interest rates and the magnification of the duration effect [9].