1. Report Industry Investment Rating No information provided in the text. 2. Core Viewpoints of the Report - The bond market in the second quarter may continue to oscillate and recover. The term spread is expected to gradually decline, and the credit spread may fluctuate at a low level. It is recommended to continue leveraging, selecting rides, and appropriately extending the duration. The 10 - year Treasury bond yield is expected to fall to around 1.6% - 1.7% around the middle of the year [5][36]. 3. Summary by Relevant Catalogs 3.1 March Bond Market: Oscillation, Widened Term Spread, and Narrowed Credit Spread - In March, the long - term bonds oscillated and adjusted. The term spread widened, and the credit spread narrowed. The yields of 10 - year and 30 - year Treasury bonds increased by 4.2bps and 7.9bps respectively to 1.82% and 2.35%. The current 30 - year and 1 - year Treasury bond spread is as high as 113.1bps, and the spread between 30 - year and 10 - year bonds is 53.5bps, almost the highest level since 2023. Except for 3 - year and 5 - year Tier 2 capital bonds, the spreads between other credit bonds and the same - term China Development Bank bonds are basically around or within the 20th percentile since 2023 [1][9]. - The current bond market differentiation and the weak long - term bond situation are the result of multiple factors. Rising prices have led to market concerns about inflation pressure pushing up interest rates, which is more evident in long - term bonds. The short - end is relatively stable due to loose funds. The instability of long - term bonds has led institutions to shorten the duration, and the decrease in inter - bank deposit rates has made wealth management and money market funds increase bond allocation, reducing short - term credit rates [1][9]. 3.2 Fundamentals: Continued Stability with Increased K - shaped Differentiation - The Spring Festival factor has boosted the economic data from January to February to some extent, and the economy has basically remained stable. After excluding the Spring Festival factor, the real recovery momentum of the economic fundamentals has not significantly strengthened. The Spring Festival in 2026 was late, driving up data such as industrial added value and exports. The Spring Festival factor increased exports by 6.1 percentage points. In March, affected by the delayed resumption of work after the festival, relevant economic data may decline [2][13]. - In March, the manufacturing PMI rebounded to 50.4%, returning above the boom - bust line. There is a certain seasonality in the rebound, and the current level is comparable to the seasonal average. The service and construction industry PMIs also rebounded, but their absolute levels are low. Overall, the economy shows a stable trend [17]. - The rise in prices has not effectively translated into investment and financing demand and interest rate - rising pressure. PPI is likely to turn positive in March, but the rise has significant structural characteristics. The PPI of industries related to non - ferrous metals and crude oil has rebounded significantly, while the PPI of mid - and downstream industries is still under pressure. The rebound in PPI has not led to a comprehensive improvement in corporate profits. There is a significant K - shaped differentiation in corporate profits, with only a few industries seeing large profit increases, while the profit growth rates of other industries are still low, resulting in low financing demand [21]. - In April, the financing demand may decline seasonally, which will further widen the bank's asset gap and increase the bond - allocation demand. The issuance of government bonds in April is usually the lowest in a year, and the social financing scale remains low, resulting in insufficient asset supply. On the demand side, the gap between bank deposit growth and loan growth is still large, and the weak loan trend may continue, which will drive banks to increase bond - allocation [23]. 3.3 Short - term Factors Drive the Intensification of Long - Short - end Differentiation, which May Not Last in the Long Run - The recent long - short - end differentiation is mainly due to short - term factors such as inflation sentiment and end - of - quarter bank institutional behavior adjustments, rather than fundamental and capital factors. Inflation itself should not trend - wise push up long - term interest rates. The current long - term bond's greater reaction to prices is inconsistent with historical experience. The current price increase is mainly due to imported factors, which will not increase corporate investment and financing demand and has no trend - wise impact on interest rates [33]. - After the end of the quarter, the bank's bond - allocation power will recover, and combined with loose funds, the market may continue to recover. The previous bond market adjustment before the end of the quarter was mainly related to bank institutional behavior. Banks may sell bonds to realize floating profits at the end of the quarter and adjust their bond - holding structures due to end - of - quarter indicator assessments. After the end of the quarter, the bank's bond - allocation demand is expected to recover, and the short positions of trading institutions will be closed, driving the market to recover [34].

1. Report Industry Investment Rating No information about the report industry investment rating is provided in the given content. 2. Core Viewpoints of the Report - The long - end of secondary capital bonds and perpetual bonds showed significant strength last week, with the long - end yield decline more prominent than the short - end. The short - end yield of secondary and perpetual (二永) bonds has been at a historical low, making further decline difficult. Institutions started to bet on medium - and long - duration bonds, with the 7 - year bond being the most favored. The 7 - year spread quantile is still relatively high, indicating potential for further betting [2][9][10]. - The curves of general credit bonds and urban investment bonds have flattened. The general credit bond curve shows characteristics of "flattened short - end, steepened middle - section, and declined long - end", while the urban investment bond curve shows "flattened short - end, locally steepened middle - section, and differentiated long - end" [3][11][13]. - In terms of trading volume, short - end trading volume increased, while the trading volume of general credit bonds decreased slightly. High - yield urban investment bond trading was mainly concentrated in regions such as Beijing, Shandong, Hunan, and Guangdong [15][17][22]. - In primary issuance, the net financing of urban investment bonds in general credit bonds recovered significantly, while the net financing of financial bonds showed a significant outflow, and the net financing of science and technology innovation bonds was negative [23][26][29]. 3. Summary According to the Directory 3.1 Secondary Market: The Short - and Medium - end Remains Steep, and the Trading Volume is Generally Stable 3.1.1 Market Trends: The Long - end of Secondary and Perpetual Bonds Strengthened Significantly, and the General Credit Bond Curve Flattened - **Secondary Capital Bonds**: Yields across all tenors declined, with the long - end performing better. The 7 - year and 10 - year quantiles dropped significantly. Credit spreads across all tenors narrowed, with the long - end compression more significant. The short - and medium - end of the term spread flattened, while the long - end (10Y - 7Y) became steeper, and the curve's long - end structural bulge still exists [2][9]. - **Perpetual Bonds**: The yield trend was similar to that of secondary capital bonds. The 4 - 7 - year yield decline was greater, and the 7 - year spread decreased by 7.3bp. The 4Y - 3Y term spread decreased by over 3bp, and its quantile dropped by nearly 15 percentage points [10]. - **General Credit Bonds**: Yields across all tenors declined, with the long - end decline being the largest. Spreads generally compressed, with the short - end showing small fluctuations and the long - end quantiles dropping significantly. The curve showed differentiation, with the short - end flattening, the middle - section steepening slightly, and the long - end declining [11][12]. - **Urban Investment Bonds**: Yields across all tenors generally declined, with the long - end decline more prominent. Spreads mainly compressed, with the long - end compression more significant. The curve structure was differentiated, with the short - end flattening, the middle - section locally steepening, and the long - end slightly rising [13]. 3.1.2 Trading Volume: Short - end Trading Volume Increased, and General Credit Bond Trading Volume Declined Slightly - **Secondary and Perpetual Bonds**: The total trading volume of secondary and perpetual bonds decreased. For secondary capital bonds, the trading volume of the short - end (within 1 year) increased significantly, while that of some medium - and long - term tenors decreased. For perpetual bonds, the trading volume also decreased, with the short - end trading volume increasing [15][16]. - **General Credit Bonds**: The total trading volume of general credit bonds decreased slightly. Among them, the trading volume of industrial bonds increased, while that of urban investment bonds and quasi - urban investment bonds decreased. The trading volume of different tenors within each category showed different trends [17][18]. - **High - Yield Urban Investment Bonds**: Trading was mainly concentrated in regions such as Beijing, Shandong, Hunan, and Guangdong, with cities like Beijing, Zhangjiajie, Qingdao, Xiamen, Jinan, and Weifang having relatively high trading volumes [22]. 3.2 Primary Issuance: The Net Financing of Urban Investment Bonds Recovered Significantly, and the Net Outflow of Financial Bonds was Obvious - **General Credit Bonds**: The total issuance last week was about 441.9 billion yuan, a year - on - year increase of about 150 billion yuan. The net financing was about 120.7 billion yuan, a year - on - year increase of about 167.7 billion yuan. The net financing of urban investment bonds recovered significantly, while that of industrial bonds decreased significantly [23]. - **Financial Bonds**: The total issuance last week was about 20.3 billion yuan, a year - on - year decrease of about 131.3 billion yuan. The net financing was about - 101.7 billion yuan, a year - on - year decrease of about 202.4 billion yuan. The issuance of securities company bonds, perpetual bonds, and commercial financial bonds declined significantly [26]. - **Science and Technology Innovation Bonds**: The issuance last week was about 41.1 billion yuan, a year - on - year increase of about 27.4 billion yuan. The net financing was about - 19.3 billion yuan, a year - on - year decrease of about 27.3 billion yuan [29].

1. Report Industry Investment Rating - No information is provided in the given content about the report industry investment rating. 2. Core Viewpoints of the Report - Yield being too high is not a risk, while being too low is. In March, the bond market mainly traded on expectations, and the term premium reached a new high. Long - end yields being high is not a risk as the term spread acts as a natural moat. Short - end yields being low is a risk as they have little ability to withstand fluctuations. The "low - probability" risk in the bond market is the short - end yield increase, with the potential trigger being the supply of certificates of deposit. Short - end yields could rise by 10BP in the short - term, and the long - end cannot withstand the short - end increase. In April, there is no need to rush into long - end trading [1][6][7][8]. 3. Summary by Relevant Catalogs 3.1 Bond Market's "Low - Probability" Risk - **March Bond Market Expectation Trading**: In March, the bond market mainly traded on expectations, and the term premium reached a new high. After the geopolitical conflict, the domestic imported inflation expectation trading heated up. Before the Two Sessions, there was still the after - effect of the February reserve requirement ratio cut expectation trading, and after the Two Sessions, the bond market gave up expectations for monetary policy. The 10 - year yield recovered after rising, and the 30 - year yield remained high after rising. By the end of the month, the 10 - 1 spread was close to 60BP, and the 30 - 10 spread reached 56BP, fully pricing in the risks in the expectation trading [6]. - **Long - End Yield Analysis**: Long - end yields being high is not a risk. The term spread indicates the continuation of the "bear steepening" pattern. The risk of "bear flattening" is excluded because the debt cycle is in the clearing stage and there is no condition for the monetary policy to tighten first. The term spread is a natural moat for the long - end. However, the 30 - year ultra - long bond has risks such as relative supply pressure after the issuance of special treasury bonds, "tight balance" constraints at the bank duration level, and the risk of changing active bonds with a high borrowing ratio [7]. - **Short - End Yield Analysis**: Short - end yields being low is a risk. The short - end trading is crowded, and the yields are too low. Taking certificates of deposit as an anchor, the spread between them and the capital or policy rate is less than 15BP. Assets within 3 years are in an "asset shortage" state with little coupon protection. The only possible trigger for the short - end yield increase is the supply of certificates of deposit, especially from joint - stock banks. The risk is considered "low - probability" but could cause short - end yields to rise by 10BP, which would also affect the long - end [8][9]. - **April Long - End Trading Suggestion**: In April and the second quarter, there is no need to rush into long - end trading. Wait for the release of inflation and real - estate data. Accounts that seized trading opportunities in February don't need to rush into left - side trading. Accounts that didn't gain capital gains in February can be more left - sided, but it's better to choose 7 - 10 - year bonds with the protection of allocation demand [10].

Group 1: Report Industry Investment Rating - No information provided Group 2: Core View of the Report - The inflation pressure pushed up by the supply side has a relatively limited impact on the bond market. The current main factor negative to the bond market is the front - loaded and intensified use of fiscal and quasi - fiscal tools. The bank system's liquidity may be relatively abundant, and the cross - quarter fund pressure is expected to be limited. The interest rate is expected to remain in a range - bound pattern. Short - term inflation changes should be observed. There may be opportunities for medium - and long - term bond varieties, and attention should be paid to the narrowing of the term spread [4][20] Group 3: Summary by Directory 1. Funds Price - During the statistical period from March 20 to March 26, 2026, the central bank's net open - market fund injection exceeded 10 billion yuan, with an over - renewal of 5 billion yuan for MLF. The 3M and 6M repurchase operations had a net withdrawal of 30 billion yuan, showing a net withdrawal of medium - term liquidity. The funds price remained stable, with DR001 fluctuating narrowly around 1.32%, and DR007 rising slightly due to the cross - quarter factor. The yield of inter - bank certificates of deposit rebounded slightly from a low level [1][11] 2. Primary Market - During the statistical period, 45 interest - rate bonds were issued in the primary market, with a total actual issuance of 818.7 billion yuan. The issuance scale of treasury bonds increased, while that of local bonds decreased. The issuance term continued to shorten, and the proportion of issuance scale over 10 years dropped below 40% [2][13] 3. Secondary Market - During the statistical period, the yields of most - term treasury bonds declined, and the impact of energy inflation on the bond market weakened. The yield of ultra - long - term bonds, which were most affected before, declined significantly, with the yield of 30 - year treasury bonds dropping from the peak of 2.39% to 2.35% [3][14] 4. Market Outlook - Fundamentally, the inflation pressure pushed up by the supply side has a relatively limited impact on the bond market, and the adjustment range of the 10 - year treasury bond yield is generally 10 - 20bp. Policy - wise, the front - loaded and intensified use of fiscal and quasi - fiscal tools is negative to the bond market. In terms of funds, the bank system's liquidity may be relatively abundant, and the cross - quarter fund pressure is expected to be limited. The interest rate is expected to remain in a range - bound pattern. Short - term inflation changes should be observed. There may be opportunities for medium - and long - term bond varieties, and attention should be paid to the narrowing of the term spread [4][20]

1. Report Industry Investment Rating No relevant information provided. 2. Core Viewpoints of the Report - The mid - long - end of Tier 2 capital bonds and perpetual bonds of banks has recovered, and the curve of ordinary and perpetual bonds continues to steepen. The 2 - 3 - year ordinary and perpetual bonds are more favored by institutions. Considering the unclear geopolitical conflict pattern and inflation concerns, the 3Y - 2Y interval can be used as a key allocation area in the future [2][3][17]. - The trading volume of mid - long - term Tier 2 capital bonds and perpetual bonds has decreased, while the trading volume of urban investment bonds has increased significantly, driving the overall increase in the trading volume of ordinary and perpetual bonds [18][21]. - In primary issuance, the issuance of industrial bonds has increased, while the issuance of Tier 2 capital bonds and perpetual bonds remains at a low level. The issuance of science and innovation bonds has decreased compared with the previous period but still shows a significant year - on - year increase [26][29][30]. 3. Summary According to the Directory 3.1 Secondary Market: Divergent Trends of Tier 2 Capital Bonds and Perpetual Bonds, and an Increase in the Trading Volume of Urban Investment Bonds 3.1.1 Market Trends - **Tier 2 Capital Bonds**: The yields of all maturities have generally declined, with the mid - long - end declining more than the short - end. The spreads have been comprehensively compressed, and the curve shows a co - existence of local steepening in the middle and flattening at the long - end [9]. - **Perpetual Bonds**: The yield and spread trends are similar to those of Tier 2 capital bonds. The 2 - 3 - year maturity has relatively high cost - effectiveness, while the long - term bonds are more volatile [10]. - **Ordinary and Perpetual Bonds**: The curve steepening is further strengthened. The yields of 1 - 5 - year maturities generally decline, and the long - end steepening is more significant [13][14]. - **Urban Investment Bonds**: The yields of all maturities generally decline, and the curve steepening trend continues. The 2 - 3 - year maturity has a relatively large decline in yield [16]. 3.1.2 Trading Volume - **Tier 2 Capital Bonds and Perpetual Bonds**: The trading volume of mid - long - term bonds has decreased. The total trading volume of Tier 2 capital bonds has decreased by about 279 billion yuan, and that of perpetual bonds has decreased by about 252 billion yuan [18]. - **Ordinary and Perpetual Bonds**: The total trading volume has increased significantly, with an increase of more than 260 billion yuan. The trading volume of industrial bonds, urban investment bonds, and quasi - urban investment bonds has all increased to varying degrees [21]. - **High - Yield Urban Investment Bonds**: The high - yield trading last week was mainly concentrated in Shandong, Beijing, Sichuan, Fujian, Guizhou, Jiangxi and other places [25]. 3.2 Primary Issuance: Increased Issuance of Industrial Bonds, and Low - level Issuance of Tier 2 Capital Bonds and Perpetual Bonds - **Ordinary and Perpetual Bonds**: The total issuance last week was about 397 billion yuan, with a net financing of about 117 billion yuan. The issuance of industrial bonds has increased significantly, and the issuance of urban investment bonds has increased slightly [26]. - **Financial Bonds**: The total issuance last week was about 50.2 billion yuan, with a net financing of about 2.4 billion yuan. The issuance of securities company bonds is still the main force, and the issuance of Tier 2 capital bonds, commercial financial bonds, and TLAC non - capital bonds remains at a low level [29]. - **Science and Innovation Bonds**: The issuance last week was about 58.4 billion yuan, with a net financing of about 42.1 billion yuan. Although the issuance and net financing scale have declined compared with the previous period, they still show a significant year - on - year increase [30].

Summary of Conference Call Notes Industry Overview - The notes primarily discuss the insurance sector's impact on the stock and bond markets in China, particularly focusing on the expected capital inflow from insurance funds into the A-share market in 2026, estimated to be between 600 billion to 800 billion yuan [1][6]. Key Points and Arguments Insurance Fund Inflows - Insurance funds are projected to provide a regular incremental capital of 600 billion to 800 billion yuan to the A-share market in 2026, driven by an annual premium income of approximately 6 trillion yuan [1][6]. - The capital allocation to equities is expected to be around 15% to 20% of the investable funds, which translates to the aforementioned incremental inflow [6]. Market Sentiment and Asset Allocation - Insurance companies are currently cautious about the bond market, focusing their investments on local government bonds while withdrawing from long-duration active bond trading [1][4]. - In contrast, there is a positive outlook on the equity market, with insurance companies maintaining high positions in equities, particularly in the context of reasonable valuations [1][4]. Structural Pressures on Insurance Companies - The pressure on solvency is more pronounced for small and medium-sized insurance companies, which have a higher risk appetite and a significant proportion of TPR accounts [1][5]. - Large and medium-sized insurance companies, which account for 70% of the industry, are not facing immediate solvency pressures, primarily due to the downward trend of the 750-day government bond yield curve [1][5]. Interest Rate Dynamics - The bond market is experiencing a divergence in interest rates, with short-term rates declining due to ample bank liquidity, while long-term rates are rising due to the exit of trading institutions and inflation expectations [1][12]. - The current yield on 30-year government bonds is attractive for insurance companies, providing a favorable investment opportunity [1][12][13]. Dividend Preferences - The required dividend yield for insurance companies has been adjusted from 5% to around 4.5%, with a significant increase in attractiveness if dividend yields return to the 4.5% to 5% range [2][9]. Reinvestment Pressures - The reinvestment pressure on existing assets is primarily due to high-yield non-standard assets maturing from 2018 to 2019, which will need to be reinvested in a low-yield environment [8]. - This reinvestment pressure is expected to persist from 2024 to 2028, with some relief anticipated after 2027 [8]. Regulatory Environment - There is no new solvency regulation expected in 2026; the current framework allows for adjustments to alleviate pressure on specific companies [5]. - The existing solvency framework, known as "Solvency II," has been in place since 2021, with adjustments made to encourage long-term investments [5]. Market Adjustments and Risks - The market has seen some adjustments attributed to geopolitical factors and cyclical dynamics, rather than solely to the actions of small insurance companies [4][5]. - Concerns about small insurance companies selling equity assets due to solvency pressures are valid but do not reflect the broader market behavior of larger firms [9]. Additional Important Insights - The insurance sector's asset allocation strategy is influenced by the cost of liabilities, with new liabilities costing around 2% to 2.5% and existing liabilities averaging 3% to 3.2% [7]. - The overall sentiment in the market indicates that while there are pressures, particularly for smaller firms, the larger firms are likely to continue their investment strategies without significant sell-offs [9].

1. Report Industry Investment Rating There is no information provided about the industry investment rating in the given content. 2. Core Viewpoints of the Report - In the context of supply exceeding demand, certificates of deposit (CDs) may fluctuate at a low level in the range of approximately 1.5% - 1.55% in the short term, and attention should be paid to the marginal changes in funds at the end of the quarter [2][46]. - The current liquidity environment is relatively stable, but considering the repurchase operations of reverse repurchase, the room for further loosening of funds is limited. Without the expectation of interest rate cuts, the 1yMLF and the funds price (DR007) impose a lower - bound constraint on CDs, and there may be a small - scale net repurchase situation similar to the reverse repurchase operation in this month's MLF operation. However, in an environment with strong short - term allocation demand, the market remains in a state of supply falling short of demand, which may support the low - level operation of CD interest rates [2][46]. 3. Summary According to the Directory Supply: Net financing further contracts, and the term structure continues to narrow - From March 16th to 22nd, the issuance scale of CDs was 759.79 billion yuan, and the net financing amount was - 403.07 billion yuan (last week it was - 162.32 billion yuan). In terms of the supply structure, the issuance proportion of state - owned banks increased from 14% to 16%, and that of joint - stock banks decreased from 41% to 31%. In terms of terms, the weighted term of CD issuance continued to shorten to 7.98 months (the previous value was 8.28 months) [2][5]. - From March 23rd to 29th, the maturity scale of CDs decreased to 698.2 billion yuan, a weekly decrease of 464.66 billion yuan. The maturities are mainly concentrated in state - owned banks and city commercial banks. From a term perspective, the maturity amounts of 1Y and 6M CDs are relatively high, reaching 249.99 billion yuan and 169.41 billion yuan respectively [2][5]. Demand: Large - scale banks are the main secondary - market allocators, and the primary - market subscription rate declined slightly - In terms of secondary - market allocation institutions, the weekly net purchases of small and medium - sized banks decreased from 63.976 billion yuan to 12.115 billion yuan; those of large - scale banks decreased slightly from 55.302 billion yuan to 54.007 billion yuan; the weekly net sales of money market funds decreased from 84.924 billion yuan to 47.498 billion yuan; the weekly net purchases of wealth management products decreased from 12 billion yuan to 2.7 billion yuan; the weekly net purchases of other types increased by 14.096 billion yuan to 36.337 billion yuan compared with last week (22.241 billion yuan) [2][17]. - In terms of primary - market issuance, the overall market subscription rate (15DMA) decreased slightly to 92%. Among different institutions, the subscription rates of rural commercial banks and city commercial banks remained unchanged from last week at 93% and 87% respectively, while those of joint - stock banks and state - owned banks increased from 93% to 94% [2][17]. Valuation: The primary and secondary pricing of CDs continues to fluctuate at a low level - In terms of primary - market pricing, the weighted issuance rate of 1y joint - stock bank CDs decreased slightly to 1.53%. Specifically, the 3M CDs of joint - stock banks decreased by 3bp compared with last week, and the 9M CDs decreased by 2bp, around 1.51%. The 1y variety's pricing continued to fluctuate at a low level, dropping to 1.53%. In terms of term spreads, the 1Y - 3M term spread of joint - stock banks was 4.58bp, at the 13% historical quantile. In terms of credit spreads, the spread between 1Y city commercial banks and joint - stock banks was 6.42BP, with the spread quantile around 3%; the spread between rural commercial banks and joint - stock banks was 5.55BP, with the spread quantile around 6% [2][20]. - In terms of secondary - market yields, the yields of AAA - rated CDs decreased and remained in a low - level fluctuation. Specifically, the 1M and 6M varieties decreased by 4bp compared with last week, the 3M and 9M varieties decreased by 3bp and 2bp respectively, and the 1Y variety decreased by 2bp, around 1.52%. In terms of term spreads, the 1Y - 3M term spread of AAA - rated CDs was 5bp, at the 18% historical quantile level [2][27]. Comparison: The spreads between CDs and treasury bonds and policy - bank bonds basically remained unchanged - Specifically, the spread between the 1yAAA - rated CD yield and the DR007:15DMA funds widened from 6.70BP to 7.35BP; the spread with the R007:15DMA funds widened from 0.91BP to 1.42BP; the spread between CDs and treasury bonds increased slightly from 25.57BP to 25.82BP, with the quantile remaining at 28%; the spread between CDs and policy - bank bonds increased slightly from 4.33BP to 4.41BP, with the quantile remaining around 5%. In addition, the spread between AAA medium - and short - term notes and CDs narrowed from 1.72BP to 1.68BP, and the quantile decreased to around 9% [2][33].

1. Report Industry Investment Rating No information provided in the content. 2. Core Viewpoints of the Report - Last week, the released February inflation data (CPI同比 1.3%, PPI同比 -0.9%) slightly exceeded market expectations. The February import - export growth rate was remarkable, and the US stated that the Iran conflict would end soon, making the Middle - East situation uncertain. The bond market declined again, and ultra - long bonds tumbled. The trading activity of ultra - long bonds increased slightly, with the term spread widening and the variety spread narrowing [1][4][10]. - For the 30 - year Treasury bond, as of March 13, the spread between the 30 - year and 10 - year Treasury bonds was 47BP, at a historically low level. Considering domestic economic data, the economic downward pressure in December eased, with the estimated December GDP year - on - year growth rate at about 4.5%, a 0.4% increase from November. The manufacturing PMI in January and February dropped to 49.3 and 49 respectively, indicating a weak start to the year. The deflation risk continued to ease. The report believes that the bond market is more likely to correct in the near future due to factors such as rising domestic inflation risk and reduced central bank bond - buying scale. The 30 - 10 spread is expected to fluctuate at a high level in the short term [2][11]. - For the 20 - year CDB bond, as of March 13, the spread between the 20 - year CDB bond and the 20 - year Treasury bond was 13BP, at a historically low position. Similar to the 30 - year Treasury bond situation, the bond market is more likely to correct in the near future. However, considering the bond market is still in a large oscillation range, the variety spread of the 20 - year CDB bond is expected to continue to fluctuate in a narrow range [3][12]. 3. Summary According to Relevant Catalogs 3.1 Ultra - long Bond Review - The February inflation data (CPI同比 1.3%, PPI同比 -0.9%) slightly exceeded market expectations. The February import - export growth rate was very good, and the US's statement on the Iran conflict made the Middle - East situation uncertain. The bond market declined, and ultra - long bonds tumbled. The trading activity of ultra - long bonds increased slightly, with the term spread widening and the variety spread narrowing [1][4][10]. 3.2 Ultra - long Bond Investment Outlook - **30 - year Treasury Bond**: As of March 13, the 30 - 10 spread was 47BP, at a historically low level. December economic downward pressure eased, with GDP growth rate estimated at 4.5% year - on - year, a 0.4% increase from November. January and February manufacturing PMI dropped, and deflation risk continued to ease. The bond market is more likely to correct due to rising inflation risk and reduced central bank bond - buying. The 30 - 10 spread is expected to oscillate at a high level in the short term [2][11]. - **20 - year CDB Bond**: As of March 13, the 20 - year CDB - Treasury spread was 13BP, at a historically low position. Similar economic situation as the 30 - year Treasury bond. The bond market is more likely to correct, but the variety spread of the 20 - year CDB bond is expected to fluctuate in a narrow range [3][12]. 3.3 Ultra - long Bond Basic Overview - The balance of outstanding ultra - long bonds is 25.3 trillion. As of February 28, ultra - long bonds with a remaining term over 14 years totaled 1,655,081 billion (excluding asset - backed securities and project revenue notes), accounting for 15.3% of the total bond balance. Local government bonds and Treasury bonds are the main sub - varieties. By variety, Treasury bonds accounted for 27.5%, local government bonds 67.3%, etc. By remaining term, the 30 - year variety has the highest proportion [13]. 3.4 Primary Market - **Weekly Issuance**: Last week (2026.3.9 - 2026.3.15), the issuance volume of ultra - long bonds decreased, totaling 474 billion yuan. Compared with the week before last, the total issuance volume dropped significantly. By variety, Treasury bonds issued 320 billion, local government bonds 154 billion, etc. By term, 15 - year bonds issued 30 billion, 20 - year 16 billion, 30 - year 107 billion, and 50 - year 320 billion [18]. - **This Week's Scheduled Issuance**: The announced ultra - long bond issuance plan for this week totals 1,442 billion. Ultra - long local government bonds account for 1,436 billion, and ultra - long medium - term notes 6 billion [24]. 3.5 Secondary Market - **Trading Volume**: Last week, ultra - long bonds were very actively traded, with a trading volume of 11,303 billion, accounting for 11.7% of the total bond trading volume. By variety, ultra - long Treasury bonds accounted for 38.9% of the total Treasury bond trading volume, ultra - long local bonds 45.0% of the total local bond trading volume, etc. Compared with the week before last, the trading volume of ultra - long bonds increased by 532 billion, and the proportion increased by 1.3% [27]. - **Yield**: Due to factors such as inflation data and international situation, the bond market declined, and ultra - long bonds tumbled. For Treasury bonds, the yields of 15 - year, 20 - year, 30 - year, and 50 - year bonds changed by 5BP, 6BP, 9BP, and 9BP respectively to 2.16%, 2.31%, 2.37%, and 2.55%. Similar changes occurred in CDB bonds, local bonds, and railway bonds [39]. - **Spread Analysis**: - **Term Spread**: Last week, the term spread of ultra - long bonds widened, with an absolute low level. The 30 - 10 spread of benchmark Treasury bonds remained at 47BP, a 2BP change from the week before last, at the 44% quantile since 2010 [46]. - **Variety Spread**: Last week, the variety spread of ultra - long bonds narrowed, with an absolute low level. The spreads of 20 - year CDB bonds and railway bonds against Treasury bonds were 13BP and 15BP respectively, a - 1BP change from the week before last, at the 11% and 10% quantiles since 2010 [47]. 3.6 30 - year Treasury Bond Futures - Last week, the main 30 - year Treasury bond futures contract TL2606 closed at 111.06 yuan, with an increase of - 1.53%. The total trading volume was 47.12 million lots (114,506 lots), and the open interest was 13.07 million lots (- 2,023 lots). The trading volume increased significantly compared with the week before last, and the open interest decreased slightly [54].

Core Insights - The report highlights a strengthening of self-discipline in interbank deposits, an expansion of the yield curve, and the uncertainty regarding economic and policy turning points, leading to a cost-reduction strategy for banks and a focus on 3-5 year yield spreads [3][9]. - The strategy suggests investing in 1-year low-grade certificates of deposit, 3-5 year perpetual bonds, and 3-year state-owned enterprise real estate bonds [3][11]. Market Trading Logic - The market trading this week revolves around three main themes: strong inflation readings, robust import and export data, and enhanced self-discipline in interbank demand deposits, which further strengthens expectations for banks to reduce costs [9][10]. - The self-discipline upgrade in interbank deposits is expected to lower the central cost of bank liabilities, which will subsequently reduce the issuance costs of short-term products like interbank certificates of deposit, providing substantial support for short-term interest rates [9][10]. Inflation and Economic Data - Strong inflation readings have disturbed market sentiment, but they are unlikely to trigger a policy shift. The current inflation pressure is primarily driven by supply-side factors rather than a broad-based recovery in demand [10][11]. - The strong performance of import and export data is seen as a seasonal effect rather than a trend improvement signal, with expectations of a natural decline in March as the seasonal effects dissipate [10][11]. Future Strategies - The report indicates that the market is at a crossroads between short and long ends, with opportunities to flatten the yield curve. It recommends continuing to allocate funds to 1-year AA- certificates of deposit and 3-5 year perpetual bonds while considering high-rated real estate bonds for their defensive characteristics [11][12]. - The past week saw a continuation of a differentiated market pattern, with short-term products performing relatively strongly while mid to long-term products experienced notable adjustments [11][12]. Portfolio Recommendations - The suggested portfolio allocation includes 20% in 3-year AAA perpetual bonds, 30% in 5-year AAA bank bonds, 30% in 1-year AA certificates of deposit, and 20% in 3-year AAA real estate bonds [13][14]. - The cumulative return of the weekly strategy since the beginning of 2025 is 3.83%, outperforming both short-term and mid-long-term bond indices [13][14].

Group 1 - The report indicates that the secondary market for perpetual bonds is experiencing a notable increase in trading activity, particularly in the mid-term maturities, with significant demand for liquidity-driven bonds [13][11] - The yield curve for secondary capital bonds has shown a slight steepening, with short-term yields declining and long-term yields increasing, reflecting cautious pricing of long-term credit risk by institutions [11][9] - The trading volume for 4-5 year bonds has surged to approximately 805 billion, nearly doubling from the previous week, indicating a strong preference for mid-term bonds [13][12] Group 2 - The issuance of credit bonds has returned to normal levels, with a total of 333.52 billion issued, marking a significant increase compared to the previous week, although it is slightly down year-on-year [17][18] - The issuance of corporate bonds exceeded 100 billion, contributing the largest increment to the overall issuance, while financial bonds saw a notable decline [17][18] - The report highlights a substantial recovery in the issuance of sci-tech bonds, with a total of 202 billion issued this week, reflecting a year-on-year increase of nearly 70% [19]