1. Report Industry Investment Rating No relevant information provided. 2. Core View of the Report The report focuses on the cost - effectiveness and application prospects of the long - substitution strategy for the 30 - year Treasury bond futures (TL contract). By comparing the net - price trends, basis structures, and holding - return differences between the CTD bond of the TL contract and various spot targets, the report validates the feasibility of the long - substitution strategy. Back - testing shows that the strategy with the implied spread signal performs best, achieving annualized excess returns of 1.35%, 0.81%, and 1.05% for the 30 - year active bond, ChinaBond 30 - year Treasury bond index, and 30 - year Treasury bond ETF respectively. The TL contract can provide a more flexible allocation plan for investors [1][3][80]. 3. Summary According to the Table of Contents I. Current Cost - Effectiveness of the TL Contract as a Spot Long - Substitution (1) Net - Price Trend Correlation between the CTD Bond of the TL Contract and the 30 - Year Treasury Bond Active Bond/Index - The CTD bond of the TL contract is currently anchored to the 30 - year old bond. Its duration is shorter, yield is higher, and coupon rate is significantly higher than those of the 30 - year active bond and the ChinaBond 30 - year Treasury bond index. - In general, the net - price trends of the CTD bond of the TL contract and the 30 - year active bond/new index are similar. When the spread between new and old bonds narrows or widens significantly, differences may occur. In the case of a narrowing spread between new and old bonds and rising/volatile interest rates, the net - price trend of the CTD bond of the TL contract may be stronger than that of the 30 - year active bond/index; conversely, it may be weaker [2][9][11]. (2) Comparison of the Basis of the TL Contract and the Holding Returns of the 30 - Year Treasury Bond Active Bond/Index - The basis of the TL contract can be split into the holding return of the CTD bond and the net basis. The holding return accounts for a relatively high proportion in the basis pricing. - The coupon rate of the CTD bond of the TL contract is significantly higher than those of the 30 - year active bond and the ChinaBond 30 - year Treasury bond index. The net basis of the TL contract fluctuates greatly, increasing the probability of higher "coupon - like" returns compared to the 30 - year active bond/index [12][17][20]. (3) Rule Summary - The CTD bond of the current TL contract is anchored to the 30 - year old bond, with a shorter duration, higher yield, and higher coupon rate. - The TL contract is likely to have higher "coupon - like" returns than the 30 - year active bond/index. Assuming that the 30 - year Treasury bond interest rate does not rise close to 3% in the short term, the feature of the TL contract being anchored to the relatively high - coupon old bond is expected to continue [25][26]. II. Back - testing of the Long - Substitution Strategy (1) Comparison of Rolling Long - Position Returns between Futures and Spot - By comparing the continuous holding returns and risk performance of the TL Treasury bond futures contract, the 30 - year active bond, and the ChinaBond 30 - year Treasury bond index in the same back - testing period, the cost - effectiveness of the futures tool in a simple long - position allocation scenario can be intuitively judged. - Without considering capital costs, the annualized return of continuously holding the TL contract is only 0.66% lower than that of the 30 - year active bond. The difference between the annualized return of the ChinaBond 30 - year Treasury bond index and that of continuously holding the TL contract is small, indicating the feasibility of further back - testing the long - substitution strategy [29][31]. (2) Signal and Strategy Construction - Signal types: Three signals are constructed, including the historical quantile of the basis level, the "minimum" threshold for the basis convergence of futures converted from the spot holding return, and the superposition of the first two signals. - Strategy construction: Based on the above signals, a long - substitution strategy is back - tested on the TL contract. The futures closing date is set as the second - last trading day of the month before the futures contract delivery month. The spot targets include the 30 - year Treasury bond active bond, ChinaBond 30 - year Treasury bond index, and 30 - year Treasury bond ETF. The strategy also involves capital management and a specific back - testing time interval [32][34][37]. (3) Back - testing of the Futures Long - Substitution Strategy - For the 30 - year Treasury bond active bond, the implied spread signal performs best. The annualized return of signal 1 and the superposition signal is 11.74%, 1.35% higher than holding the 30 - year Treasury bond active bond, with better risk - return ratios. - For the ChinaBond 30 - year Treasury bond index, the implied spread signal 1 and the superposition signal also perform best, with an annualized return of 12.45%, 0.81% higher than holding the index, and better risk - control and risk - return indicators. - For the 30 - year Treasury bond ETF, using the implied spread signal, signal 1 and the superposition signal achieve an annualized return of 12.15%, 1.05% higher than holding the ETF [37][54][73]. (4) Conclusion - The TL contract can be regarded as a substitute for the 30 - year old Treasury bond. The long - substitution strategy with the implied spread as the core signal can effectively optimize asset - allocation efficiency, providing a differentiated allocation plan for investors, especially suitable for index - based assets such as the ChinaBond 30 - year Treasury bond index and 30 - year Treasury bond ETF [80].

Report Industry Investment Rating No relevant content provided. Core Views of the Report - Equity still has allocation value, waiting for the conversion from valuation-driven to earnings-driven [6] - In 2026, the basis central tendency may rise slightly, but the volatility remains relatively high [7] - In 2026, the equity market is expected to shift from valuation-driven to earnings-driven in the benchmark scenario [8] Summary according to the Table of Contents 1. Market Review and Macroeconomic Outlook - **A-share Market Review**: In 2025, major broad-based indices all closed up, with the ChiNext 50 leading with a nearly 60% annual increase. Most sectors in the CITIC primary industry index closed up, with the communication index leading with an over 80% increase. The share of equity ETFs increased, and northbound capital and margin trading funds were active [9][17][24] - **Macroeconomic Outlook**: In 2026, overseas liquidity may remain loose, and Sino-US economic and trade relations are in a phase of relaxation. Domestically, policies will be more precise and targeted, with fiscal policy remaining proactive and monetary policy staying moderately loose. Growth factors are expected to improve, and inflation is expected to rise moderately, driving the PPI to recover and improving corporate profitability [27][28][30] 2. Valuation and Drivers - **Steady Return of Chinese Capital Pricing Power**: The influence of US Treasury yields on A-share valuations is gradually weakening, while the impact of Chinese Treasury yields on the growth style is increasing, indicating a strengthening of the pricing power of Chinese Treasury yields for growth stocks [33][38] - **Current Valuation's Historical Position and Horizontal Comparison**: The PE of the CSI 300 and ChiNext indices is at the 64% and 35% historical quantiles respectively, not in a high range. Compared with global indices, A-shares are not expensive. The "Buffett Index" also suggests that the A-share market still has investment value [42][46][50] - **Dividend Yield and Risk Premium**: There is a "seesaw" relationship between the 10-year Chinese Treasury yield and the dividend yield of the dividend index. Currently, the stock market still has strong allocation cost-effectiveness, and the benchmark scenario for the index's upward drive in 2026 is expected to shift from valuation-driven to earnings-driven [53][59][63] - **Earnings Growth as a Strong Support for Relatively Strong Indices**: Earnings growth supports the relative strength of corresponding indices. In 2025, the earnings and revenue of small-cap and growth-style indices recovered faster, corresponding to the market style of small-cap growth [64][67][70] 3. Investor Structure and Basis Central Tendency Outlook - **2025 Basis Review**: In 2025, the basis central tendency of most futures index varieties continued to decline, with increased volatility in April. The influence of investor structure changes on the basis is significant, with the basis weakening in the first quarter and the basis central tendency of IC and IM contracts being lower than in previous years in the second half of the year [80] - **Changes in the Position of Public Funds in the Market Investor Structure**: Since 2022, the long-hedging power of public funds has gradually emerged and is currently stronger than the short-hedging power [88] - **Impact of Off-exchange Product Hedging on the Futures Index Basis**: The scale of off-exchange derivatives represented by snowball products decreased significantly in 2025, and their hedging impact is weaker than in the past two years. The long-substitution strategy of public funds is gradually emerging, and the relaxation of the futures index position limit of public funds may make them an important variable in observing the futures index investor structure [79][90] 4. Operation Outlook and Response - **Operation Outlook Scenario Analysis and Market Characteristics**: The benchmark scenario for the 2026 market is that the equity market shifts from valuation-driven to earnings-driven. There are also three other scenarios: earnings and valuation double-driven strength, valuation drag on weakness, and double weakness in earnings and valuation with risk warnings [114][118][119] - **Response Strategies under Different Scenarios**: Under the benchmark scenario, consider long-hedging when the basis is relatively weak. In the stronger scenario, reduce short-hedging. In the weaker scenario, lock in lower short-hedging costs. In the double-weak scenario, increase short-hedging [121][122]