Core Viewpoint - The essence of duration rotation in the bond market is highlighted, emphasizing the dynamic adjustment strategies based on interest rate cycles, where long bonds act as offensive tools during declining rates and short bonds serve as defensive shields during rising rate risks [4]. Group 1: Bond Market Dynamics - The bond market is a cornerstone of the modern financial system, with its depth and breadth underpinning the stable operation of financial markets [4]. - The core driver of bond price fluctuations is interest rates, which guide capital flows [4]. - Different maturity bonds exhibit a natural trade-off between yield, risk, and liquidity, leading to a "pursuit of profit migration" phenomenon during interest rate cycles [4]. Group 2: Yield Curve Prediction - The Nelson-Siegel model is utilized to fit interest rates of different maturities, focusing on three factors: level, slope, and curvature [5]. - Predicting the yield curve involves forecasting these three factors, which allows for the establishment of expected yield curves and the calculation of expected holding period yields for zero-coupon bonds [5]. Group 3: Model Improvement - Unit root stationarity tests indicate that the level factor is non-stationary but differenced stationary, while the slope and curvature factors are stationary [6]. - An autoregressive model is employed for the slope and curvature factors, with a focus on improving the level factor's modeling [6]. - The improved model enhances the directional prediction success rate for the level factor [7]. Group 4: Duration Rotation Strategy - The constructed duration rotation strategy based on predicted factor values shows significant and robust excess returns [8]. - From June 1, 2009, to October 31, 2025, the strategy achieved an absolute return of 110.37% with an annualized return of 4.63%, outperforming the benchmark's absolute return of 76.62% and annualized return of 3.52% [8]. - The strategy outperformed the benchmark in all years except 2012 [8]. Group 5: Current Strategy Signal - As of October 31, 2025, the latest signal from the duration rotation strategy indicates a recommendation to allocate to long-duration interest rate bonds [9].