Report Industry Investment Rating - The report does not provide an investment rating for the industry [1][3][10][14][22][39][49][83] Core Viewpoints - The determination of the interest rate term structure is the result of the combined effects of liquidity preference, rational expectations, and term preference. The current flat state of China's interest rate term structure has rationality and inertia, but it is difficult to further flatten, and a slow steepening may occur in the next stage [3][13][83] - The general change rule of the interest rate term structure in the US and Japan conforms to the rational expectations theory, with the main change patterns being "bull steepening" or "bear flattening." However, under some special conditions, the term preference theory also has certain explanatory power. When the short - end yield "hits bottom," the change in the curve shape is also special, mainly dominated by the long - end yield [3][21][83] - Since the end of 2024, China's interest rate term structure has experienced a relatively rare "bull flattening," which may be related to the flattening of inflation expectations from a rational expectations perspective and the term preferences of institutional investors such as insurance and banks from a term preference perspective [3][22][83] - Currently, it is advisable to analyze the pricing of long - and short - end interest rates separately. The short - end yield depends on policy expectations, and the long - end yield depends on the real estate cycle [3][39][84] - The "anti - involution" effect will determine the amplitude of the curve steepening. There may be an interdependent cycle relationship among real estate prosperity, "anti - involution," and nominal economic growth, and the conditions for curve steepening are accumulating [3][52][84] Summary by Directory 1. Interest Rate Term Structure Theory Overview - The theoretical hypotheses about the interest rate term structure mainly include the liquidity preference theory, rational expectations theory, market segmentation theory, and term preference theory. The liquidity preference theory can explain why the yield curve slopes upward to the right under normal conditions, the rational expectations theory can explain the common change patterns of the yield curve, the market segmentation theory can explain various yield curve shapes, and the term preference theory combines the rational expectations theory and the market segmentation theory [10][11][12] 2. Historical Experience of Interest Rate Term Structures in the US and Japan - The historical experience of the US Treasury yield curve change basically conforms to the theoretical predictions, mainly switching between "bull steepening" and "bear flattening." Special phenomena include the "Greenspan Conundrum" and the "zero - interest - rate" stage from 2009 - 2015. The Japanese Treasury yield curve also had a long - term low short - end yield stage, and the long - end yield dominated the curve shape [14][17][18] 3. Changes in China's Interest Rate Term Structure 3.1 Recent Changes in China's Interest Rate Term Structure - Since the end of 2024, China's Treasury yield curve has experienced a rare "bull flattening," which may be related to the flattening of long - term inflation expectations and the term preferences of institutional investors [22][25] 3.2 China's Interest Rate Term Structure from a Rational Expectations Perspective - China's current economic growth is stronger than that of the US and Japan during their "zero - interest - rate" periods, so the short - term interest rate floor is higher. The long - end yield may be affected by the flattening of inflation expectations [26][27] 3.3 China's Interest Rate Term Structure from a Term Preference Perspective - The flattening of China's interest rate term structure is related to the term preferences of institutional investors such as insurance and banks. Insurance institutions' increasing bond - holding share and commercial banks' preference for long - term bonds due to factors like net interest margin and mortgage rates have contributed to this [31][33][34] 4. Analysis of China's Interest Rate Term Structure Change Patterns - Currently, it is recommended to analyze the pricing of long - and short - end yields separately. The short - end yield depends on policy expectations, and the long - end yield depends on the real estate cycle [39][41][45] 5. "Anti - Involution" and Interest Rate Term Structure 5.1 Prospects for Changes in China's Interest Rate Term Structure - It is difficult for China's interest rate term structure to further flatten. The bank system may lack the willingness to further lower long - end yields. The term structure's trend towards "bull steepening" or "bear steepening" requires fundamental conditions [49][50][51] 5.2 "Anti - Involution" and Interest Rate Term Structure Steepening - As of July 2025, China's PPI has been declining year - on - year for 34 months, and the CPI has stabilized. "Anti - involution" drives price adjustment expectations, but the realization of these expectations requires a suitable liquidity environment. The effect of "anti - involution" may be closely related to foreign trade and the real estate sector [52][54][59] 5.3 Nominal Economic Growth, "Anti - Involution," and Real Estate Prosperity - There may be an interdependent cycle relationship among real estate prosperity, "anti - involution," and nominal economic growth. The conditions for curve steepening are accumulating, including improved monetary activity, the stabilization of real estate prosperity, and the reduced need for further interest rate cuts in the short term [72][74][76] 6. Conclusion and Outlook - The determination of the interest rate term structure is the result of the combined effects of liquidity preference, rational expectations, and term preference. The current flat state of China's interest rate term structure has rationality and inertia, but it is difficult to further flatten, and a slow steepening may occur in the next stage [83][84][85]