1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report The report suggests that local bonds may be approaching an allocation window. It analyzes the primary and secondary market conditions of local bonds, including net financing, issuance terms, issuance spreads, secondary spreads, and trading volume and turnover rates [1]. 3. Summary by Directory 3.1 Primary Market Conditions - **Net Financing**: This week, local bond issuance was 107.8 billion yuan, with a net repayment of 43 billion yuan. Next week, the planned issuance is 261.8 billion yuan, with a net financing of 124.3 billion yuan, a significant increase compared to this week [1][3]. - **Issuance Terms**: The issuance proportion of 10 - year local bonds was the highest this week (47%), and the proportion of 10 - year and above bonds reached 76%, an increase from last week. The 10 - year bond issuance proportion increased by about 24 percentage points [1]. - **Debt - Resolution - Related Local Bonds**: This week, special refinancing bonds worth 26.7 billion yuan were issued. In 2025, 33 regions have disclosed plans to issue special bonds for replacing hidden debts, totaling 1.7362 trillion yuan. Special special bonds worth 1.5 billion yuan were issued this week, and as of the end of this week, the disclosed and issued scales in 2025 were 273 billion yuan and 245.4 billion yuan respectively [2]. - **Issuance Spreads**: The weighted average issuance spread of local bonds this week was 12bp, wider than last week. The 30 - year local bond had the highest weighted average issuance spread at 19.3bp. Except for the 5 - year, 20 - year, and 30 - year bonds, the spreads of other terms widened [1]. - **Fund - Raising Allocations**: As of the end of this week, the main allocation directions of newly - added special bond funds in 2025 were cold - chain logistics, municipal and industrial park infrastructure construction (32%), transportation infrastructure (21%), social undertakings (12%), and affordable housing projects (12%). The proportion of land reserve allocations increased by 7.7% compared to 2024 [2]. - **Issuance Plan**: In the second quarter of 2025, 36 regions have disclosed local bond issuance plans, with an estimated total issuance of 2.48 trillion yuan. In June, the planned issuance is 1007.6 billion yuan [30]. 3.2 Secondary Market Conditions - **Secondary Spreads**: This week, the secondary spreads of 15 - year and 30 - year local bonds were advantageous, and the secondary spread of 10 - year local bonds narrowed significantly. The secondary spreads of 15 - year and 30 - year bonds were 21bp and 20bp respectively. The historical quantile of the 30 - year bond's secondary spread was 87% [4]. - **Trading Volume and Turnover Rates**: This week, both the trading volume and turnover rate of local bonds increased. Tianjin, Shenzhen, and Ningbo had relatively high turnover rates. The trading volume reached 598.3 billion yuan, and the turnover rate was 1.17%. Tianjin, Jiangsu, and Sichuan had large trading volumes [5].

Group 1 - The issuance of local bonds is expected to accelerate in the second quarter, but the impact may be relatively limited. The first quarter saw a slower pace of new bond issuance compared to 2023, but the progress of replacement bonds was faster. As of April 3, 2025, the cumulative issuance of new general and special bonds accounted for 34.9% and 21.8% of the annual quota, respectively [10][14][25]. - In the second quarter, the issuance of local bonds may speed up, with a focus on 10-year and longer-term bonds. The demand for stable growth and policy guidance is likely to lead to a significant increase in the issuance of new special bonds, while the replacement of hidden debt bonds is expected to be nearly complete [19][27]. Group 2 - Banks remain the main players in local bond allocation, with a recent increase in the willingness of broad-based funds to allocate. Since the implementation of the debt policy in October 2023, the interest and allocation willingness of broad-based funds towards local bonds have significantly increased, with the investment share rising from 5.44% in October 2023 to 8.54% in February 2025 [3][19]. - Local bonds currently exhibit both allocation value and trading value, making them a timely investment. The liquidity of local bonds is notably weaker than that of government bonds, and their market performance tends to lag behind. However, the current price-performance ratio of local bonds is high, providing both allocation and trading opportunities [3][19][27].