1. Report Industry Investment Rating - The report does not explicitly mention the industry investment rating. 2. Core Viewpoints of the Report - Currently, it is a good window for non - bank institutions to take long positions. They should maintain long - term durations and seize the bull market around the end of the quarter. It is expected that long - term bond yields will hit new lows around the end of the quarter, and the 10 - year Treasury bond yield is expected to fall to the 1.4% - 1.5% level in the third quarter [6][21]. 3. Summary by Related Content Bond Market Performance - This week, the bond market continued to strengthen in a volatile manner, with more significant declines in the yields of non - active varieties. The overnight rate remained around 1.4%, and R007 stayed within 1.6%. The yields of 10 - year and 30 - year Treasury bonds decreased by 0.4bps and 1.2bps to 1.64% and 1.84% respectively. The yields of other varieties declined more notably, such as the 1 - year certificate of deposit yield dropping by 3.3bps to 1.64%, and the yields of 3 - year and 5 - year AAA - secondary capital bonds falling by 2.7bps and 2.4bps to 1.81% and 1.91% last week [1][9]. Narrowing of Yield Spreads - Recently, non - active bonds or non - active varieties have outperformed active bonds or active varieties, with significant narrowing of relevant yield spreads. For example, the yield of the 50 - year Treasury bond dropped from 2.08% at the end of last month to 1.95% on June 20, a decrease of 12.3bps, and the yield spread between the 50 - year and 30 - year Treasury bonds narrowed by 6.4bps. The yield spread between 30 - year local government bonds and Treasury bonds also narrowed by 2.8bps this week, and the yield spread between 10 - year AAA medium - term notes and 10 - year Treasury bonds narrowed by 4.2bps to 41.4bps last week. The yield spread between non - active and active bonds also significantly narrowed, such as the spread between the 30 - year active bond (2500002.IB) and the second - active bond (2400006.IB) narrowing by 2.2bps this week. The narrowing is mainly due to two reasons: first, after the yields approach previous lows, key varieties receive more attention, and before key points are broken through, the market compresses non - active varieties and tenors; second, strong long - buying sentiment and improved liquidity of relevant varieties compress the premium of ultra - long bonds, which is most evident in the 50 - year Treasury bond [2][10]. Selling Pressure from Banks - If the market space is to be further expanded, active varieties need to break through key points, which may occur around the end of this quarter. The key force is banks, especially city and rural commercial banks. Due to the pressure of quarter - end indicator assessments such as average duration and liquidity indicators, as well as the need to realize floating profits when banks' profitability is insufficient, banks usually face significant bond - selling pressure at the quarter - end. Currently, small and medium - sized banks may face greater selling pressure than large - sized banks. On one hand, the central bank's care for liquidity and the significant decline in the liability costs of large - sized banks have alleviated their pressure; on the other hand, the profitability of small and medium - sized banks may be weaker than that of large - sized banks. In the first quarter, the year - on - year net profit growth rate of city commercial banks declined the most, at - 6.7%, while those of joint - stock banks and rural commercial banks were - 4.5% and - 2.0% respectively, and large - sized banks had a slight positive growth of 0.1%. Seasonally, small and medium - sized banks usually reduce their bond holdings in May or June, and this reduction is more obvious considering government bond supply. They will then increase their bond allocations in July and August [3][13]. Asset Shortage Situation - The current market is in an asset shortage situation. On one hand, the supply of government bonds is slowing down, and it is expected to slow down in the second half of the year. From the perspective of year - on - year increase, government bonds may enter a stage of year - on - year decrease in the third quarter. Due to the accelerated credit投放 in the previous period and the increase in real interest rates, the credit rhythm has also slowed down, as reflected by the year - on - year decrease in new credit in April and May of the second quarter. On the other hand, the supply of funds remains abundant, and the liability side of banks remains stable. The current capital price is significantly lower than the same period in previous years, and even when the quarter - end shock occurs, the funds are not significantly tightened. The liability side of small and medium - sized banks is stable, with a deposit growth rate of 7.7% in May, an increase from April, indicating that small and medium - sized banks are generally under - allocated in the context of asset shortage [4][16]. Future Bond - Buying Behavior of Banks - For banks, the bonds sold before the quarter - end may be bought back after the quarter - end. Small and medium - sized banks find it difficult to continuously sell bonds in the context of asset shortage. After the quarter - end indicator pressure eases, banks are more likely to buy back bonds. If not, the funds obtained from selling bonds will continue to exist in the form of excess reserves or short - term capital lending, which will lead to looser funds after the quarter - end, and the capital price may fall more than expected. The decline in short - term interest rates will lead to a steeper yield curve and increase the cost - effectiveness of long - term bonds. In a market where supply is lower than demand, the shift of small and medium - sized banks from large - scale selling to buying may lead to a further rapid strengthening of the market, and bond yields may experience a new downward trend [5][19].