Report Industry Investment Rating - Not provided in the document Core Viewpoints - The high-pressure situation of implicit debt supervision remains unchanged, and emphasis is placed on preventing the "risk of risk disposal." Local governments are accelerating their exit from the list of key debt provinces. The issuance and trading of local government bonds and urban investment bonds have shown certain trends, and the dynamic adjustment of the debt situation and corporate operations need to be continuously monitored [2][4][8] Summary by Directory 1. News Review - **Policy for Inter - city Railways**: The National Development and Reform Commission issued an opinion to regulate inter - city railway construction, focusing on debt risk control from both asset and liability sides. On the asset side, strict access and exit standards are set based on passenger flow density; on the liability side, high - risk areas are restricted from adding new local government debt for inter - city railway construction [5][6][7] - **Exit from Key Provinces**: Jilin officially announced its successful exit from the list of key debt provinces, and Qinghai aims to exit in 2026. After exiting, the provinces may promote infrastructure investment and economic recovery, but risks such as blind transformation of urban investment enterprises should be watched out for [8] - **"Exit from Platform" of Urban Investment Enterprises**: Nine urban investment enterprises declared to become market - oriented business entities or exit the financing platform list this week, mainly in the infrastructure investment and financing industry. Since October 2023, a total of 1012 enterprises have made such declarations, with more in eastern provinces [11] - **Early Redemption of Bonds**: Twenty - three urban investment enterprises redeemed bond principal and interest in advance this week, involving 24 bonds with a total scale of 39.15 billion yuan [13] - **No Postponement or Cancellation of Bond Issuance**: There was no postponement or cancellation of urban investment bond issuance this week [14] 2. Issuance of Local Government Bonds and Urban Investment Enterprise Bonds - **Local Government Bonds**: The issuance and net financing scale of local government bonds increased this week, and the stock scale exceeded 55 trillion yuan for the first time. A total of 26 local bonds were issued, with new bonds and refinancing bonds issued. The weighted average issuance term decreased, and the issuance cost decreased [14][15] - **Urban Investment Bonds**: The issuance and net financing scale of urban investment bonds increased this week, with a decrease in issuance interest rate and a narrowing of issuance spread. The issuance was mainly private - placement bonds, with a 5 - year term as the main type. The issuer's main body level was mainly AA +. One overseas urban investment bond was issued [20] 3. Trading of Local Government Bonds and Urban Investment Enterprise Bonds - **Market Liquidity**: The central bank conducted net investment in the open market, but due to the approaching Spring Festival and tax - payment period, the capital market was tight, and short - term capital interest rates increased [26] - **Level Adjustment and Credit Events**: There were no urban investment level adjustment events or urban investment credit risk events this week [26] - **Local Government Bonds**: The spot trading volume of local government bonds increased by 3.90%, and the maturity yields of most terms decreased, with an average decline of 2.67BP [26] - **Urban Investment Bonds**: The trading volume of urban investment bonds increased by 0.98%, and the maturity yields of most terms decreased, with an average decline of 2.74BP. The credit spreads of 1 - year, 3 - year, and 5 - year AA + urban investment bonds narrowed [27] - **Abnormal Trading of Urban Investment Bonds**: Thirteen abnormal transactions of 11 bonds of 9 urban investment entities occurred this week, with a decrease in the number of abnormal transactions, entities, and bonds compared with the previous period [27] 4. Important Announcements of Urban Investment Enterprises - Forty - two urban investment enterprises issued announcements on changes in senior management, legal representatives, etc., changes in controlling shareholders and actual controllers, equity/asset transfers, cumulative new borrowings, and name changes [32]

Summary of the 2026 Fixed Income Strategy Conference Call Industry Overview - The conference call focused on the fixed income market and monetary policy outlook for 2026, emphasizing government bonds and credit strategies. Key Points and Arguments Monetary Policy Expectations - A moderate easing of monetary policy is anticipated in 2026, with a potential interest rate cut likely after the Spring Festival, although the probability of a January cut is low [1][3] - The central bank may maintain liquidity through reverse repos or reserve requirement ratio cuts to support government bond issuance [1][4] Inflation and Economic Indicators - Inflation is expected to rebound in 2026, with CPI averaging around 0.5%, PPI at approximately -1.1%, and GDP deflator at about 0.3% [1][5] - This inflation rebound is projected to raise the 10-year government bond yield by nearly 10 basis points, keeping the annual interest rate around 1.8-1.85% if a 10 basis point cut occurs [1][5] Investment Strategies - A 2-3 year credit carry strategy is recommended, with a net carry of over 40 basis points, potentially yielding returns of 2-2.1% [1][10] - Focus on low-frequency, high-probability, high-reward strategies, particularly in the context of rising interest rate expectations for 5-year and 10-year bonds [1][10] Government Bond Supply and Fiscal Policy - Government bond supply pressure is expected to peak in the first quarter, May-June, and August-September, with the central bank likely providing liquidity support during these periods [1][18] - Fiscal expansion is anticipated, but at a slower pace than the previous year, with total fiscal scale projected to reach around 15 trillion yuan [1][16] Credit and Local Government Bonds - Local government bonds should be monitored for issuance rhythm and supply pressure, with a recommendation to increase allocation under a loose monetary policy [6][18] - Credit bonds should be selected based on corporate fundamentals and industry outlook, with a focus on high-quality enterprises during economic recovery [6][38] Convertible Bonds and Equity Strategies - The convertible bond market is expected to exhibit institutional characteristics, with high premium new bonds favored [3][27] - Strategies should adapt to equity market performance, increasing exposure to high-conversion value convertible bonds when market conditions are favorable [7][8] Risk Management and Market Environment - The overall market environment in 2026 is expected to remain stable, with limited upward movement in interest rates unless inflation significantly exceeds expectations [12][19] - Emphasis on capturing opportunities through logical, high-probability strategies, particularly around anticipated interest rate cuts [12][10] Specific Investment Recommendations - Short-term strategies should focus on short-end government bonds, policy financial bonds, and certificates of deposit, particularly 2-3 year credit bonds and 5-year government bonds [11][19] - Long-end active bonds may be considered if the central bank exceeds expectations in rate cuts or bond purchases; otherwise, short-term high-frequency trading is advised [11][19] Conclusion - The 2026 fixed income market is characterized by a cautious yet optimistic outlook, with strategies focusing on credit carry, local government bonds, and convertible bonds, while maintaining vigilance against potential risks in the credit market [12][38]

1. Report Industry Investment Rating - Not provided in the given content 2. Report's Core Viewpoints - The issuance rhythm of local government bonds has shifted from being concentrated in the second and third quarters to a more balanced distribution throughout the year. Since 2019, especially after 2020, the issuance scale in the first and fourth quarters has significantly increased due to policies emphasizing "front - loaded efforts" and "balanced issuance" [2]. - The issuance scale of local government bonds is constrained by the issuance quota. The estimated early - batch quota for 2026 is about 3.12 trillion yuan, calculated based on the 2025 local debt new quota and the proportion of pre - allocated new quotas in previous years [2]. - The gap in local government debt quota scale between different regions has widened. Developed regions have more high - quality projects that can generate stable cash flows, enabling them to issue more special bonds, while less - developed regions lack such projects [2]. - The issuance of refinancing bonds has been significantly advanced, and the peak issuance of new bonds has shifted from the second quarter to the third quarter [2]. - The pricing logic of local bonds has changed from "seasonal supply - demand dominance" to "asset shortage and policy expectation drive". After the approval of the 6 - trillion debt replacement quota in 2024, the spread of general bonds generally narrowed, while that of special bonds widened [2][3]. - There is a structural differentiation in local bond spreads, and the risk premium of special bonds has gradually emerged [3]. 3. Summaries According to Related Catalogs 3.1 Local Government Bond Issuance Rhythm - From 2015 - 2018, the issuance of local government bonds was highly concentrated in the second and third quarters. After 2019, especially after 2020, the issuance in the first and fourth quarters increased significantly [2]. - From 2022 - 2024, the proportion of refinancing bond issuance completed in the first quarter increased year - by - year, and the issuance peak of new bonds shifted from the second quarter to the third quarter [2]. 3.2 Local Government Bond Issuance Quota - The issuance scale of local government bonds is restricted by the issuance quota. The estimated early - batch quota for 2026 is about 3.12 trillion yuan, based on the 2025 new quota of 520 billion yuan and the 60% pre - allocation ratio in recent years [2]. - From 2016 - 2024, the special debt quota of Guangdong, Shandong, Jiangsu, Zhejiang, and Henan increased significantly, and the general debt quota of Hunan, Guizhou, Sichuan, Inner Mongolia, and Xinjiang increased more. The gap in debt quota scale between different regions widened [2]. 3.3 Local Bond Pricing Logic - From 2022 - 2023, the pricing logic of the local bond market was "seasonal supply - demand dominance", with clear seasonal fluctuations in spreads. In 2024 Q4, it changed to "asset shortage and policy expectation drive", with the fourth - quarter spread not rising but falling and regional spreads converging [2][3]. - After the approval of the 6 - trillion debt replacement quota in 2024, the spread of general bonds generally narrowed, while that of special bonds widened. The spread of special bonds in economically developed provinces with large issuance scales increased less, while that in regions with high debt pressure increased significantly [3]. 3.4 Local Bond Spread Differentiation - From 2024 Q3 to 2025 Q1, the spread between general bonds and special bonds showed a structural change. In 2024 Q4, the spread of special bonds widened, and this trend continued in 2025 Q1 [3].