1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The supply of urban investment bonds has seasonally weakened, and the market has entered a stock or even de - stock phase. Weak - qualified entities are accelerating their exit, increasing the scarcity of coupon assets. The secondary market trading activity has increased due to the "deposit relocation" [1][12][14]. 3. Summary According to Relevant Catalogs 2.1 Weak Entities Accelerate Exit, Coupon Scarcity Increases 2.1.1 Issuance and Repayment: Seasonal Weakening of Urban Investment Bond Supply - As of May 31, 2025, 3797 urban investment entities under the HA scope issued 280.2 billion yuan of bonds and repaid 351.5 billion yuan, with a net repayment of 71.3 billion yuan. The net repayment scale decreased by about 10.2 billion yuan month - on - month and increased by about 37.3 billion yuan year - on - year. The issuance scale was the lowest in the same period in the past three years. Since 2024, the cumulative net repayment has been 2.5 billion yuan. AA and below weak - qualified entities have cumulatively net - repaid 585.7 billion yuan, while AAA entities have net - borrowed 519 billion yuan [12][16]. - From an administrative perspective, all administrative - level entities were in a net - repayment state in May. The net - repayment amounts from high to low were prefecture - level cities (24.3 billion yuan), county - level regions (17.1 billion yuan), provincial - level (16.8 billion yuan), and park - level (13.1 billion yuan) [16]. - From a rating perspective, all rating entities were in a net - repayment state in May. The net - repayment amounts from high to low were AA (27.7 billion yuan), AAA (25.6 billion yuan), AA+ (15.8 billion yuan), below AA (140 million yuan), and unrated (90 million yuan) [17]. - From a variety perspective, the net financing amounts of various bond varieties from high to low were corporate bonds (11.4 billion yuan) and private placement bonds (6.6 billion yuan). The net - repayment amounts from high to low were SCP (44.2 billion yuan), enterprise bonds (21.4 billion yuan), MTN (10.2 billion yuan), CP (8.6 billion yuan), and PPN (4.9 billion yuan) [17]. - From a term perspective, only bonds with a term of over 3 years were in a net - borrowing state in May, with a net borrowing of 35.9 billion yuan. The net - repayment amounts of other term bonds from high to low were 2 - year (46.3 billion yuan), 6 - month to 1 - year (39 billion yuan), 3 - year (9.2 billion yuan), 6 - month and below (8.6 billion yuan), and 1 - year (4.2 billion yuan) [17]. - From a regional perspective, the provinces with the highest net financing in May were Shandong (7.3 billion yuan), Fujian (2.5 billion yuan), and Tibet (1 billion yuan). The provinces with the highest net - repayment were Jiangsu (18.2 billion yuan), Zhejiang (9.2 billion yuan), and Hubei (8.5 billion yuan) [18]. 2.1.2 Maturity Pressure: About 7.7 Trillion Yuan to Mature Before the End of 2026 - As of May 31, 2025, the maturity pressure of 3797 urban investment bonds under the HA scope before the end of 2026 is about 7.7 trillion yuan, with 3.4 trillion yuan in 2025 and 4.4 trillion yuan in 2026. By the end of 2025, the remaining maturity pressure is about 335.06 billion yuan (assuming 100% exercise of callable bonds), with maturity peaks in June (56.93 billion yuan), August (53.09 billion yuan), and September (57.12 billion yuan) [39]. - The top 5 provinces with the remaining maturity amounts by the end of 2025 are Jiangsu, Shandong, Zhejiang, Sichuan, and Hubei [40]. - The top 5 cities are Qingdao, Nanjing, Suzhou, Chengdu, and Nantong [41]. - The top 5 districts and counties are Jiangning District of Nanjing, Huangdao District (including the West Coast New Area) of Qingdao, Pudong New Area of Shanghai, Huangpu District of Guangzhou, and Wuzhong District of Suzhou [41]. - The top 5 parks are Xi'an High - tech Industrial Development Zone, Guangzhou Economic and Technological Development Zone, Suzhou High - tech Industrial Development Zone, Zhengzhou Airport Economy Comprehensive Experimental Zone, and Taizhou Medical High - tech Industrial Development Zone [41]. - The top 5 entities are Jiangsu Communications Holding Co., Ltd., Hunan Expressway Group Co., Ltd., Zhejiang Communications Investment Group Co., Ltd., Shandong Hi - Speed Group Co., Ltd., and Xi'an Hi - tech Holdings Co., Ltd. [41]. 2.1.3 Primary Subscription: Average of 3.00 Times, Continued High - Level Allocation Sentiment - As of May 31, 2025, among the urban investment bonds issued in the month, 103.3 billion yuan of bonds disclosed bidding data, with a cumulative bidding scale of 309.7 billion yuan and an average subscription multiple of 3.00 times, a decrease of 0.06 times month - on - month [44]. - In terms of administrative levels, the subscription sentiment of county - level and park - level entities significantly increased. The average subscription multiples of provincial, prefecture - level, county - level, and park - level entities were 1.99 times (a decrease of 0.26 times month - on - month), 3.16 times (a decrease of 0.23 times month - on - month), 4.09 times (an increase of 0.98 times month - on - month), and 3.47 times (an increase of 0.45 times month - on - month) respectively [46]. - In terms of bond ratings, investors favored the credit - sinking strategy. The average subscription multiples of AAA, AA+, AA, AA(2), and AA - were 1.26 times (a decrease of 0.36 times month - on - month), 2.94 times (a decrease of 0.08 times month - on - month), 4.24 times (an increase of 0.75 times month - on - month), 3.51 times (an increase of 0.27 times month - on - month), and 2.53 times (a decrease of 0.26 times month - on - month) respectively [46]. - In terms of bond terms, the sentiment for long - term bonds remained high. The average subscription multiples for bonds within 1 year, 1 - 2 years, 2 - 3 years, 3 - 5 years, and over 5 years were 2.14 times (a decrease of 0.4 times month - on - month), 3.57 times (an increase of 0.18 times month - on - month), 4.2 times (an increase of 1.19 times month - on - month), 3.27 times (a decrease of 0.15 times month - on - month), and 3.47 times (an increase of 0.4 times month - on - month) respectively [47]. 2.2 Deposit Relocation Triggers Credit Market, Trading Activity Increases 2.2.1 Valuation Spread: Yield Continues to Decline Driven by Demand - Side - In May 2025, due to the loose monetary policy, the central level of capital interest rates declined, and the coupon advantage of credit bonds became prominent. The reduction of bank deposit rates led to the "deposit relocation" effect, increasing the allocation demand for credit bonds by wealth management products. Urban investment bond yields showed a unilateral decline. However, at the end of the month, the bond market adjusted due to tariff policy fluctuations and institutional behavior changes [54]. - In the short - term, the spreads of each implied rating for short - term bonds have reached historical lows. The main capital gain space may lie in the compression of grade spreads and term spreads. For 1 - year bonds, the yields of AAA, AA+, AA, and AA(2) decreased by 9.1bp, 9.1bp, 9.1bp, and 10.1bp to 1.74%, 1.79%, 1.84%, and 1.89% respectively; for 3 - year bonds, they decreased by 9.0bp, 9.0bp, 14.0bp, and 16.0bp to 1.84%, 1.92%, 2.00%, and 2.11% respectively; for 5 - year bonds, they decreased by 7.5bp, 7.5bp, 12.5bp, and 13.5bp to 1.96%, 2.05%, 2.17%, and 2.37% respectively [55]. - Vertically, short - term spreads have reached new lows, while term spreads and grade spreads still have room for compression. As of May 31, the valuation yields of urban investment bonds with each implied rating from 1 - year to 5 - year have reached historical lows, and the three - year percentiles are all at extremely low levels of 5% and below. The credit spreads have also reached lows, with the three - year percentiles of 1 - year and 3 - year ratings below 10%. Only 5 - year bonds still have compression space [59]. 2.2.2 Secondary Trading: Increased Activity Month - on - Month, Medium - and Long - Term Bonds Lead the Gains - In May 2025, the sample trading records of urban investment bonds were about 16,000, with an average daily trading volume of about 841, a month - on - month increase of 1.1%. The average daily trading volume reached a new high this year. The taken trading volume was about 12,000, accounting for 76%, an increase of 3 percentage points from the previous month. The long - short ratio was 3.41, an increase of about 0.46 basis points from the previous month [63]. - In terms of bond ratings, the trading proportion of AAA - rated bonds was 9.7%, an increase of 0.4 percentage points month - on - month; AA+ was 21.5%, a decrease of 0.6 percentage points; AA was 23.7%, an increase of 2.2 percentage points; AA(2) was 35.8%, a slight decrease of 0.1 percentage point; AA - was 9.4%, a decrease of 1.8 percentage points. - In terms of terms, the trading proportion of bonds within 1 year was 31.2%, a significant decrease of 7.4 percentage points month - on - month; 1 - 3 years was 44.7%, an increase of 1.9 percentage points; 3 - 5 years was 21.0%, a significant increase of 4.9 percentage points; over 5 years was 3.3%, an increase of 0.7 percentage points [64].

Core Viewpoint - The low interest rate environment in China is deepening, leading to a structural asset shortage and forcing banks to adjust their liability rate mechanisms, impacting the wealth management market significantly [1]. Group 1: Deposit Migration Effect - The continuous decline in deposit rates has strengthened the "deposit migration" effect, with the scale of wealth management products returning to 30 trillion yuan [2][3]. Group 2: Performance Pressure and Asset Allocation Transformation - Wealth management companies are continuously lowering the performance benchmarks of newly issued products, reflecting increased pressure on investment returns across the industry [5][6]. - Companies are accelerating the transition to multi-asset and multi-strategy allocations, introducing strategies like dividend+, gold+, and quantitative+ to address the "yield drought" [8][9]. - Investors are shifting preferences towards daily opening and minimum holding period fixed-income products, balancing liquidity and yield amid narrowing advantages of cash management products [11]. Group 3: Regulatory Framework Upgrade - Strict implementation of net value management and control over net value smoothing techniques is being enforced, with regulatory bodies addressing practices that deviate from the original intent of net value transformation [13][14]. - The information disclosure framework is being improved to enhance product transparency, addressing the complexities of multi-asset allocations and increasing volatility [13][14]. - The pace of license approvals for wealth management companies is slowing, leading to a differentiated competitive landscape where established firms focus on specialized product systems based on customer profiles [15].

Core Viewpoint - The recent adjustment of deposit interest rates by various banks reflects significant pressure on net interest margins, with a notable trend of rapid follow-up and substantial rate cuts observed across the banking sector [1][4][5]. Group 1: Rate Adjustments - Since May 20, multiple city commercial banks and private banks have quickly followed suit in lowering deposit interest rates, with some banks reducing rates by as much as 30 basis points [1]. - Shanghai Huari Bank has lowered its deposit rates for the third time since April, with a 10 basis point reduction for both demand and 3-year fixed deposits [2]. - As of May 28, several city commercial banks, including Beijing Bank and Jiangsu Bank, have completed their deposit rate adjustments [2]. Group 2: Comparative Analysis - After adjustments, Ningbo Bank's deposit rates remain higher than those of other city commercial banks, with rates for various terms ranging from 0.80% to 1.60% [3]. - In contrast, Changsha Bank has implemented larger rate cuts, with reductions of up to 30 basis points for longer-term deposits [3]. Group 3: Implications of Rate Cuts - The current round of deposit rate cuts is characterized by larger and faster adjustments compared to previous rounds, indicating ongoing pressure on banks' net interest margins [4][5]. - Analysts suggest that the average reduction in deposit rates exceeds the LPR cut, which may lead to a structural adjustment in bank liabilities, potentially causing a "deposit migration effect" [6]. - The significant rate cuts may prompt depositors to move funds from lower-rate banks to those offering higher rates or to shift some deposits into non-bank financial products [6].