Quantitative Credit Strategy - As of August 1, the secondary capital bond heavy strategy has rapidly recovered, with the weekly average yield of the credit style secondary bond heavy portfolio rising nearly 87 basis points, reaching the highest absolute return since April [2][12] - The secondary bond heavy and long-term industrial strategies showed significant recovery compared to other portfolios, with weekly returns of 0.31% and 0.51%, respectively, compensating for over 65% of the losses from the previous week [2][12] - Financial bond duration strategies generally outperformed, with secondary bonds, perpetual bonds, and brokerage bond duration portfolios beating the mid-to-long-term benchmark by approximately 9.2 basis points, 8.7 basis points, and 10.4 basis points, respectively [2][12] Duration Tracking of Varieties - The transaction duration of secondary capital bonds has risen to 4.8 years as of August 3, with urban investment bonds and industrial bonds weighted at 2.24 years and 3.03 years, respectively, both at over 90% historical percentile levels since March 2021 [3][14] - Among commercial bank bonds, the weighted average transaction durations for secondary capital bonds, bank perpetual bonds, and general commercial bank bonds are 4.79 years, 4.02 years, and 2.91 years, respectively, with bank perpetual bonds at a relatively low historical level [3][14] - For other financial bonds, the durations of securities company bonds, subordinated securities bonds, insurance company bonds, and leasing company bonds are 1.78 years, 2.37 years, 3.00 years, and 1.61 years, respectively, with securities company bonds and subordinated securities bonds at low historical percentiles [3][14] Yield Heat Map of Coupon Assets - As of August 4, the yields of non-financial and non-real estate industrial bonds have generally declined, with yields for 1-year and 2-3 year private enterprise public non-perpetual bonds down by 5.8 basis points and 6.7 basis points, respectively [4][19] - Real estate bonds also saw a decline in yields, with the yield drop for 3-year private enterprise public non-perpetual bonds exceeding 6 basis points [4][19] - In the financial bond sector, bank subordinated bonds are favored, particularly in the short end, with yields for 1-year shares and 1-2 year city commercial bank secondary capital bonds down by 11.5 basis points and 8.8 basis points, respectively [4][19] Long-term Credit Bond Insights - The issuance scale of long-term credit new bonds totaled 13.42 billion, with supply returning to a low level, possibly due to rising issuance costs, as long-term bond issuers await favorable issuance windows [5][21] - Correspondingly, the average issuance rate of long-term credit new bonds continued to rise, with the issuance rate of long-term urban investment bonds reaching over the 50th percentile for the first time in 24 years [5][21] Local Government Bond Supply and Trading Tracking - The average issuance rate of local bonds has marginally increased, with the yield spreads for 30-year, 20-year, and 10-year local bonds widening to 14 basis points, 12 basis points, and 11 basis points, respectively, compared to the same-term government bonds [6][22]

Group 1: Report Industry Investment Rating - No relevant content provided Group 2: Core Viewpoints of the Report - The local government bond market continued to expand last week, with the stock of local bonds reaching 50.79 trillion yuan as of May 16, 2025 [3][11]. - The issuance of local government bonds last week totaled 197.249 billion yuan, including 99.393 billion yuan of new special bonds and 21.938 billion yuan of refinancing special bonds [4][18]. - Since mid - late March this year, the yield of local government bonds has been in a continuous downward trend [5][36]. Group 3: Summary by Directory 1. Stock Market Overview - As of May 16, 2025, the stock of local bonds reached 50.79 trillion yuan. New special bonds accounted for over 43% of the outstanding local bonds, and refinancing special bonds accounted for 21% [3][11]. - Among the special bonds with clear funding uses, the stock balances of shantytown renovation, park and new district construction, and rural revitalization were all over 1 trillion yuan. The stock balance of toll roads exceeded 880 billion yuan, and that of water conservancy and ecological projects was over 200 billion yuan [3][11]. - As of May 16, 2025, Guangdong, Jiangsu, and Shandong ranked top three in terms of local bond stock, with each exceeding 3 trillion yuan. Other GDP - large provinces such as Sichuan, Zhejiang, Hunan, Henan, Hebei, and Hubei also had a stock of over 2 trillion yuan [3][11]. 2. Primary Supply Rhythm - Last week, local government bonds worth 197.249 billion yuan were issued, including 99.393 billion yuan of new special bonds and 21.938 billion yuan of refinancing special bonds. "Ordinary/project revenue" and "repayment of local bonds" were the main investment areas for special bond funds [4][18]. - As of May 16, 2025, the issuance of special refinancing special bonds in May had reached 30.168 billion yuan, accounting for 5.47% of the monthly local bond issuance [4][18]. - In terms of the issuance term structure, the issuance of 7 - 10 - year local bonds last week had a relatively high proportion, reaching 42.26%. The average coupon rates of local bonds for each major term were basically the same as those two weeks ago. The spread between the 30 - year local bond issuance rate and the same - term treasury bond slightly widened to 23.65BP, and the spread of the 20 - year local bond to the same - term treasury bond slightly narrowed to 14.35BP [4][27]. - From the perspective of new bond subscription, the upper limit of the bid rate last week increased slightly compared with two weeks ago, and the primary tender sentiment significantly recovered [4][27]. - Five provinces issued new bonds last week. Anhui had the largest issuance volume this month, with terms mainly concentrated in 7 - 10 years and 10 - 20 years. Fujian followed, with terms mainly concentrated within 7 years and 10 - 20 years. Guangxi, Guangdong, Shandong, and Sichuan also had relatively large new issuance amounts. Except for Guangxi and Inner Mongolia, the issuance rates of other provinces were below 2% [4][35]. 3. Secondary Trading Characteristics - Since mid - late March this year, the yield of local government bonds has been in a continuous downward trend. As of May 16, 2025, the yield of 10 - year local bonds was 1.9%, with a spread of 22.07BP to the same - term treasury bond, at the 72.6% quantile since 2024. The quantiles of the price spreads of 15 - year and 30 - year varieties were 72.6% and 88.2% respectively [5][36]. - The turnover rate of local bonds rebounded last week, and the turnover rates of all term varieties significantly increased compared with two weeks ago. The highest weekly turnover rate was for varieties within 10 years, at 1.02% [5][43]. - In terms of regions, Shandong had over 300 trading transactions and Jiangsu had over 200 trading transactions last week. The average trading term of local bonds last week was 16.53 years, with an average yield of 1.96% [5][43]. - In terms of the investor structure, commercial banks, insurance companies, securities proprietary departments, and broad - based funds were the most active institutions in local bond trading. Insurance companies remained the main undertakers of local bond supply, with a total net purchase of local bonds worth 57.304 billion yuan, of which the purchase of varieties over 20 - 30 years accounted for 73%. Other institutions were all net sellers [5][44].

Group 1: Quantitative Credit Strategy - The recent performance of perpetual bonds and broker bonds strategies has shown a high success rate as of May 9 [2] - Short-term strategies yielded limited excess returns, while mid to long-term strategies, excluding city investment duration and barbell strategies, showed positive excess returns [2][12] - Financial bonds and non-financial credit heavy strategies have widened the gap in cumulative excess returns over the past four weeks, particularly with increased yield elasticity in financial bond duration strategies [2][12] Group 2: Duration Tracking of Various Bonds - As of May 9, the weighted average transaction duration for city investment bonds and industrial bonds reached 2.09 years and 2.51 years respectively, both above the 90th percentile since March 2021 [3][15] - The weighted average transaction durations for secondary capital bonds, perpetual bonds, and general commercial bank bonds are 4.19 years, 3.59 years, and 2.30 years respectively [3][15] - Other financial bonds such as securities company bonds and insurance company bonds have varying durations, with some at historically low levels and others at high levels [3][15] Group 3: Yield Heatmap of Credit Assets - As of May 12, the valuation yield and spread of private enterprise real estate bonds are higher than other types of bonds [4][17] - Non-financial, non-real estate industrial bonds saw a yield decline of around 10 basis points, particularly in the one-year category [4][18] - Financial bonds with high valuation yields include leasing company bonds and securities subordinate bonds, with significant yield declines noted in certain categories [4][18] Group 4: Long-term Credit Bond Insights - The market shows weak willingness to increase long-duration credit bonds, despite the approaching low yields of government bonds and short-term assets [5][20] - Transaction volumes for mainstream long-duration industrial bonds have increased but remain below levels seen in late March, indicating insufficient trading sentiment to support long-term bond markets [5][20] - The recent week saw a decline in the transaction share of long-term credit bonds, falling below 70% [5][20] Group 5: Local Government Bond Supply and Trading Insights - The average coupon rates for 10-year, 20-year, and 30-year local government bonds are 1.79%, 2.07%, and 2.05% respectively, with varying spreads [6][23] - The liquidity in the interbank market remains reasonably ample, with moderate issuance volumes of local bonds, leading to stable supply pressure [6][23] - Long-term spreads continue to widen, but adjustments have led to a more stable outlook [6][23]

Group 1: Report's Core View - The local government bond market continued to expand. As of April 25, 2025, the outstanding local government bond balance reached 50.49 trillion yuan. The issuance and trading of local government bonds showed different characteristics in terms of supply rhythm, maturity structure, and investor structure [12]. Group 2: Local Government Bond Supply and Trading Tracking 1. Stock Market Overview - As of April 25, 2025, the outstanding local government bond balance reached 50.49 trillion yuan. New special-purpose bonds accounted for over 43% of the outstanding local government bonds, and refinancing special-purpose bonds accounted for 21% [12]. - Among the outstanding bonds with clear fund uses, shantytown renovation, park and new district construction, and rural revitalization were the major investment areas, with outstanding balances all exceeding 1 trillion yuan. The outstanding balance of toll roads exceeded 870 billion yuan, and that of water conservancy and ecological projects exceeded 200 billion yuan [12]. - As of April 25, Guangdong, Jiangsu, and Shandong ranked the top three in terms of outstanding local government bond balance, with each province's balance exceeding 3 trillion yuan. Other GDP - large provinces such as Sichuan, Zhejiang, Hunan, Henan, Hebei, and Hubei also had outstanding balances above 2 trillion yuan [12]. 2. Primary Supply Rhythm - Last week, local government bonds worth 191.122 billion yuan were issued, a slight decrease from the previous week. Among them, new special - purpose bonds were worth 116.707 billion yuan, and refinancing special - purpose bonds were worth 42.921 billion yuan [19]. - In terms of the use of raised funds, "ordinary/project revenue" and "repayment of local bonds" were the main investment areas for special - purpose bonds. The issuance scale of "replacement of implicit debt" decreased compared with the previous week. As of April 25, the issuance of special refinancing special - purpose bonds in April had reached 261.669 billion yuan, accounting for 37.74% of the monthly local government bond issuance scale [19]. - In terms of the maturity structure of issuance, last week, the issuance of local government bonds with maturities of 1 - 7 years and 7 - 10 years accounted for relatively high proportions, both exceeding 30%. The average coupon rates of local government bonds for major maturities were basically the same as the previous week. The spread between the issuance rate of 30 - year local government bonds and the same - maturity treasury bonds narrowed to 21.22BP, and the spread of 20 - year local government bonds compared with the same - maturity treasury bonds significantly narrowed to 9.9BP [30]. - From the perspective of new bond subscription, the upper limit of the tender rate last week was basically the same as the previous week, and the primary auction sentiment remained sluggish. Newly added issuance occurred in multiple provinces last week. Hunan had the largest issuance volume of new local government bonds this month. Some provinces showed obvious maturity characteristics. Sichuan, Guizhou, and Heilongjiang had a relatively large proportion of local government bonds with maturities over 7 years, while Jiangsu, Anhui, and Beijing mainly issued bonds with maturities within 7 years. The average issuance rates in most regions were within 2%, while the average issuance rates in Sichuan and Jiangxi were above 2.3%, indicating certain allocation value [30][39]. 3. Secondary Trading Characteristics - Since mid - to - late March this year, the yield of local government bonds has been on a continuous downward - trending oscillation. As of last Friday, the yield of 10 - year local government bonds was 1.92%, with a spread of 25.94BP compared with the same - maturity treasury bonds, at the 88.3% high - percentile level in the past 24 years. The spread of 15 - year bonds was also above 29.05BP, and the percentile levels of price spreads were all above 96.9% [42][43]. - Last week, the turnover rate of local government bonds decreased. The turnover rates of all maturity varieties significantly declined compared with the previous week. The variety with the highest weekly turnover rate was still the one with a maturity over 10 years, with a reading of 0.98%. By region, only Jiangsu and Zhejiang had more than 100 trading transactions last week. The average maturity of local government bond transactions last week was 17.3 years, and the average yield was 1.98% [49]. - In terms of investor structure, commercial banks, insurance companies, securities proprietary departments, and broad - based funds were the most active institutions in local government bond trading. Insurance companies remained the main undertakers of local government bond supply, with a total net purchase of local government bonds worth 56.411 billion yuan, of which the purchase of bonds with maturities of 20 - 30 years and above accounted for 53.15%. Among other institutions, only wealth management products also showed an increase in local government bond holdings, mainly in the positive purchase of bonds with maturities of 5 - 10 years and 20 - 30 years [54].