Group 1 - The core viewpoint of the report indicates that the bond market is experiencing a period of volatility without a clear trend, necessitating a focus on structural opportunities within the market [2][5] - On August 8, 2025, the implementation of VAT adjustments coincided with the issuance of nine new local government bonds, with overall results exceeding expectations [3][4] - The tax burden impact on self-operated and asset management institutions is estimated to be around 10 basis points (BP) and 5 BP respectively, with the theoretical yield spread between new and old bonds calculated at approximately 10 BP [3][4] Group 2 - The report highlights that the actual yield spread between new and old bonds was lower than the theoretical estimate, ranging from 4 to 7 BP, indicating a pricing adjustment reflecting a 3% VAT [3][4] - The report emphasizes the importance of liquidity and relative value in bond selection, suggesting a focus on long-term bonds with greater volatility and capital gain potential [5] - The adjustment in the curve compilation scheme implies that new bond valuations will carry more weight, potentially affecting institutions with high holdings of inactive old bonds [4]

Summary of Conference Call Records Industry Overview - The records primarily discuss the bond market, particularly focusing on local government bonds and the impact of VAT adjustments on pricing and investment strategies [1][2][4]. Key Points and Arguments 1. **Bond Market Dynamics** - Local government bond yields are converging, with a notable focus on older bonds that have higher coupons and better liquidity. New code bonds need to be reassessed for relative and absolute returns [1][3]. 2. **Impact of VAT on Bond Pricing** - Following the reintroduction of VAT, the pricing of bonds has shown a convergence in volatility. For instance, the yield range for 10-year government bonds has decreased from 1.70-1.75% to 1.68-1.72%, indicating a market in a waiting phase [2][7]. 3. **New Code Bonds Performance** - New code local government bonds are actively issued, with yields averaging 5 basis points higher than old code bonds. The pricing reflects a 3% VAT, primarily driven by proprietary trading desks, indicating a balance in tax burden sharing [4][6]. 4. **Liquidity and Spread Changes** - Both new and old local government bonds exhibit high liquidity, leading to a narrowing of spreads. The 30-year and 10-year government bonds are highlighted as having significant investment value due to their high spread positions [5][6]. 5. **Real Estate Market Insights** - The recent easing of real estate purchase restrictions in Beijing does not signal a new relaxation cycle. Existing policies are near their limits, and significant recovery in the real estate market is unlikely until 2026, requiring additional policy measures [6][7]. 6. **Inflation and Economic Stimulus** - Inflation recovery is expected to take time, with commodity prices reflecting more elasticity in futures rather than spot markets. Structural economic stimulus measures are deemed necessary for long-term stability [1][6]. 7. **Central Bank's Cautious Approach** - The central bank has shown caution in liquidity provision, with recent operations indicating a careful approach to market dynamics. The probability of funding rates dropping below 1.2% is considered low, reflecting a stable yet cautious monetary policy stance [2][7]. Other Important Insights - The market's risk appetite is diminishing, with a shift in focus from risk assets to bond market dynamics. The correlation between stock markets and bond markets has weakened, indicating a more cautious investment environment [2][3]. - The competition for older bonds is categorized into three types based on their issuance time, coupon rates, and liquidity, highlighting the strategic adjustments needed in investment approaches [3][4].

Group 1 - The bond market experienced fluctuations with yields initially rising and then falling, leading to a flattening of the yield curve. As of August 1, the yields for 30Y, 10Y, and 1Y government bonds changed by -1.87BP, -0.87BP, and +1BP, respectively, closing at 1.95%, 1.71%, and 1.37% [1][7] - The yield spread between 30Y-10Y and 10Y-1Y changed by 0.3BP and -1.64BP, reaching 24BP and 33BP, respectively [1][7] - Key factors influencing the bond market included the stock-bond relationship, the outcome of US-China tariff negotiations, limited incremental statements from the Political Bureau meeting, and fluctuations in the funding environment [1][7] Group 2 - The bond issuance scale decreased during the week of July 28 to August 3, with government bonds issued totaling 180.26 billion yuan, local government bonds at 337.135 billion yuan, and interbank certificates of deposit at 386.73 billion yuan, a total decrease of 393.33 billion yuan from the previous week [2][55] - The issuance progress of local government bonds reached 64.7%, with new special bonds and general bonds at 64% and 68.2%, respectively, indicating a steady issuance pace compared to historical averages [2][55] Group 3 - The central bank maintained liquidity by net injecting 6.9 billion yuan through 7-day reverse repos during the week of July 28 to August 1, with funding rates showing a marginal tightening before the month-end and gradually returning to a more relaxed state afterward [3][57] - The DR001 and DR007 rates changed by -20BP and -21BP, settling at 1.31% and 1.49%, respectively [3][57] Group 4 - The bond market strategy suggests a gradual balance between stocks and bonds, with attention to the short-term impact of tax adjustments on bond yields. The market is expected to experience wide fluctuations as it re-prices previous negative factors while observing new positive elements [4][67] - The government bond supply is anticipated to remain high in August, potentially reaching around 1.4 trillion yuan, marking a peak for the second half of the year [4][67] - The announcement of the resumption of VAT on newly issued government bonds starting August 8 is expected to create short-term volatility in the bond market, with older bonds potentially benefiting from tax advantages [4][67]

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report In the last week of July, with the central bank's support, funds smoothly crossed the month. The outcome of the Sino-US talks was in line with expectations, and the Politburo meeting mainly focused on advancing existing policies. The equity market fluctuated weakly, and the bond market shifted towards recovery. On Friday, the VAT policies for treasury bonds, local government bonds, and financial bonds were adjusted, and the yield of the 10-year active treasury bond fell below 1.7%. Throughout the week, the yield of the 1-year active treasury bond dropped by 1.75BP to 1.3600%, the yield of the 10-year active treasury bond decreased by 3.75BP to 1.6950%, and the yield of the 30-year treasury bond declined by 4.45BP to 1.9030% [3][6][7]. 3. Summary According to the Table of Contents (1) Interest Rate Bond Market Review: Limited Increment from the Politburo Meeting, "Old Bond Rush" Driven by VAT Adjustment - **Overall Situation**: In the last week of July, with the central bank's support, funds smoothly crossed the month. The Sino-US talks had no unexpected results, and the Politburo meeting mainly advanced existing policies. The equity market fluctuated weakly, and the bond market recovered. After the bond VAT adjustment policy was announced on Friday, the yield of the 10-year active treasury bond fell below 1.7% [3][6][7]. - **Daily Performance**: - **July 28th**: The central bank net injected 3251 billion yuan. The bond market continued the recovery trend, and the yields of major treasury bonds decreased by 1.5 - 2.5BP [7][10][11]. - **July 29th**: The central bank net injected 2344 billion yuan. Affected by the Sino-US talks and Politburo meeting expectations, the equity market strengthened, and the yields of medium - and long - term treasury bonds over 5 years increased by 3 - 4BP [7][12]. - **July 30th**: The central bank net injected 1585 billion yuan. The Politburo meeting did not mention "anti - involution" and real estate policies much. The equity market rebounded, and the yields of major treasury bonds decreased by 2 - 4BP [7][13]. - **July 31st**: The central bank net withdrew 478 billion yuan in the morning. Due to factors such as the PMI data being lower than expected and the weakening of the equity market, the bond market performed strongly, and the yields of major treasury bonds decreased by 1 - 2BP [7][14]. - **August 1st**: The central bank net withdrew 6633 billion yuan in the morning. The equity market continued to correct. After the bond VAT adjustment policy was announced in the evening, the yield of the 10-year treasury bond first rose and then fell, closing at 1.6950% [7][15][16]. (2) Funding Situation: The Central Bank Conducted Net OMO Injections Near the Month - End, and the Funding Situation was Balanced and Loose The central bank net injected 69 billion yuan this week. The funding sentiment index was generally below 50. The cross - month funding situation was stable and loose. The issuance price of 1-year national and joint - stock bank certificates of deposit dropped to 1.6250%, and the weekly average of DR007 was 1.53% [1][7]. (3) Primary Issuance: Net Financing of Treasury Bonds, Policy Financial Bonds, and Interbank Certificates of Deposit Increased, while Net Financing of Local Government Bonds Decreased No specific data on the increase and decrease of net financing are provided in the text, but it is mentioned that the net financing of treasury bonds, policy financial bonds, and interbank certificates of deposit increased, and the net financing of local government bonds decreased [24]. (4) Benchmark Changes: The Term Spreads of Treasury Bonds and China Development Bank Bonds Both Narrowed - **Yield Curve Changes**: The yields of short - term treasury bonds dropped by 1.01BP, and the yields of short - term China Development Bank bonds decreased by 2.52BP. The yields of long - term treasury bonds declined by 2.65BP, and the yields of long - term China Development Bank bonds fell by 4.64BP [19]. - **Absolute Level of Term Spreads**: The 10Y - 1Y spread of treasury bonds narrowed by 1.64BP to 33.25BP, and the 10Y - 1Y spread of China Development Bank bonds narrowed by 2.12BP to 26.45BP [19].