Report Summary 1. Report Industry Investment Rating No industry investment rating information is provided in the report. 2. Core Viewpoints - The value of floating - rate bonds is affected by factors such as changes in the benchmark interest rate, term spreads, and market expectations of interest rate movements. In a rising interest - rate environment, floating - rate bonds are more resistant to price declines compared to fixed - rate bonds, but they perform relatively weakly in a falling interest - rate environment. - Based on simulations of floating - rate bonds, the market expects the 1 - year LPR to decline steadily in the next two years, reaching a low of 2.8% in April 2027, and then rise to 3.1% by the end of 2027. - Considering the potential for additional interest rate cuts in the second half of the year, the allocation value of floating - rate bonds may be lower than that of fixed - rate bonds. Similarly, the current allocation value of DR007 floating - rate bonds may also be lower than that of fixed - rate bonds [167][177]. 3. Directory Summaries 3.1 China's Floating - Rate Bond Historical Changes - **Issuance Scale**: Over the past 30 years, China's floating - rate bond issuance scale has shown a fluctuating upward trend, with three rounds of expansion and adjustment. The issuance scale reached a historical peak of 637.6 billion yuan in 2021, but has significantly decreased in the past three years [14]. - **Benchmark Interest Rate**: It has evolved from a single benchmark (1 - year fixed - deposit interest rate) to a diversified one. Currently, LPR and DR007 are the mainstream benchmark interest rates [20][27]. - **Bond Types**: Policy - bank bonds and asset - backed securities have alternately dominated the market. Since 2022, policy - bank bonds have once again become the main type of floating - rate bonds [34][41]. - **Issuance Term**: The issuance term has changed from being highly concentrated (7 - 10 years) to gradually diversified and then re - concentrated (2 - 3 years) [46][51]. 3.2 Floating - Rate Bond Valuation Method - **Valuation Principle**: Based on the discounted cash - flow method (DCF), the present value of a floating - rate bond is calculated by discounting future coupon payments and the principal at maturity to the current point in time. However, the difficulty lies in predicting future coupon payments and selecting the discount rate [63][64]. - **Factors Affecting Investment Value**: Changes in the benchmark interest rate and term spreads (∆y) affect the value of floating - rate bonds. Generally, an increase in the benchmark interest rate leads to a decrease in bond value, and vice versa. The impact of term spreads on bond value needs to be analyzed in combination with changes in the benchmark interest rate [77][80]. 3.3 Relative Value of Floating - Rate Bonds - **Comparison with Fixed - Rate Bonds**: In a rising interest - rate environment, the price decline of floating - rate bonds is smaller than that of fixed - rate bonds; in a falling interest - rate environment, floating - rate bonds perform slightly worse than fixed - rate bonds [86][94]. 3.4 Absolute Value of Floating - Rate Bonds (Based on Historical Backtracking) - By observing the historical trends of floating - rate bonds with DR007 as the benchmark, it is found that the value changes of floating - rate bonds are complex and are affected by the fluctuations of the National Development Bank bond rate and DR007. When the two rates move in opposite directions, the direction of the floating - rate bond value change is clear; when they are stable, the value center of the floating - rate bond is stable; when they move in the same direction, the direction of the value change is uncertain [101][134]. 3.5 Future Interest - Rate Cut Path Implied by Current Floating - Rate Bonds - By simulating the cash flows of floating - rate bonds, the market's implied interest - rate cut/ hike path for the 1 - year LPR in the next three years can be predicted. The market expects the 1 - year LPR to decline steadily in the next two years, reach a low of 2.8% in April 2027, and then rise to 3.1% by the end of 2027. The implied interest - rate cut expectations of floating - rate National Development Bank bonds are stronger than those of Agricultural Development Bank bonds [154][162]. 3.6 Investment Value of Floating - Rate Bonds - **1 - year LPR Floating - Rate Bonds**: Considering the potential for additional interest rate cuts in the second half of the year, the allocation value of floating - rate bonds may be lower than that of fixed - rate bonds [167]. - **DR007 Floating - Rate Bonds**: Through scenario analysis, it is found that under most scenarios, the current allocation value of DR007 floating - rate bonds is lower than that of fixed - rate bonds [172][175].

Key Insights - The report indicates that the A-share market is expected to experience a seasonal rebound in July, driven by policy and performance factors, with a stable upward trend anticipated [3][2][1] - The focus for July is on three main lines: consumption, technology, and dividends, with growth sectors like technology expected to have good development prospects and investment opportunities [3][2][1] - The construction industry is seeing a recovery in activity, with a business activity index of 52.8% in June, indicating expansion, while fixed asset investment growth is slowing [5][6] - Infrastructure investment remains high, with broad infrastructure investment growth at 10.44% year-on-year for the first five months of the year, although narrow infrastructure investment growth is at 5.6% [6][9] - The real estate sector is under pressure, with a 10.7% year-on-year decline in development investment for the first five months, but policy measures are expected to improve market confidence [7][9] - The floating rate bond market is developing, with a current market size of approximately 495.9 billion yuan, accounting for about 0.3% of the total bond market [13][12] - The banking sector is benefiting from a supportive monetary policy environment, with expectations of continued easing and structural policy tools to support key areas like technology and consumption [20][21][23]

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report The report analyzes the characteristics, valuation methods, market status, and positive impacts of floating - rate bonds (FRBs). It points out that although FRBs in China are still a niche product, their development can enrich the bond market and bring benefits to both issuers and investors [3][5]. 3. Summary According to the Catalog 3.1 What are Floating - Rate Bonds? 3.1.1 Definition of FRBs - FRBs are bonds whose interest rates float regularly with the market, with the formula "interest rate = benchmark rate + fixed spread". They are issued by entities with medium - to - long - term capital needs. The benchmark rates include LPR, DR007, SHIBOR, and one - year fixed - deposit rate, with DR007 and LPR being the main ones in China [3][6]. - Compared with fixed - rate bonds, FRBs have an interest rate adjustment mechanism. They can adjust the issuer's financing cost in different interest rate environments, and have lower interest rate risk and modified duration [7]. - The main benchmark rates for FRBs in China are DR007 (about 41% of the stock), LPR (about 35%), one - year deposit rate (about 6%), and SHIBOR (about 4%) as of June 2025 [8][11]. 3.1.2 Valuation Method of FRBs - Since the future cash flows of FRBs are uncertain, the market uses the present value of the benchmark rate plus or minus points as an approximation of future cash flows for daily valuation. The daily price fluctuation of FRBs is mainly determined by the current benchmark rate and the spread yield [11][12]. 3.1.3 Overview of Overseas FRB Markets - Overseas FRB markets have a larger proportion and scale. Examples include US Treasury Inflation - Protected Securities (TIPS), which are popular during inflationary periods; US Floating - Rate Notes (FRN), which help investors hedge interest - rate fluctuations; and Hong Kong's Silver Bonds and iBond, which are designed for specific groups and inflation - hedging purposes [15][16][17]. 3.2 Development Stages and Current Situation of FRBs in China 3.2.1 Development Stages of FRBs - China's FRB market started in 1995. There were three periods of issuance scale growth from 1995 - 2000, 2002 - 2011, and 2014 - 2021, with the benchmark rate types constantly enriching. From 2022 - 2024, the issuance scale decreased due to low market interest rates [3]. - The issuance proportion of FRBs in the bond market has been declining. From 2011 - 2021, the average annual issuance scale accounted for 2.25% of the annual bond issuance, while from 2022 to June 2025, the annual average was only 0.25% [19]. - The benchmark rates for FRBs have evolved through four stages, and recently, newly - issued FRBs mainly use DR007 and 1Y LPR as benchmarks [23]. 3.2.2 Current Situation of the FRB Market - As of June 2025, the stock scale of China's FRB market is 4959 billion yuan, accounting for about 0.3% of the total bond market. Policy - based financial bonds linked to DR007 and 1 - year LPR are the main type, accounting for 78% of the FRB market, with a scale of 3890 billion yuan. Asset - backed securities account for 14% with a scale of 715 billion yuan [24]. - In terms of maturity, the remaining maturity of China's FRBs is mainly concentrated in 1 - 3 years, accounting for 61% of the market, with a scale of 3046 billion yuan. Medium - and long - term bonds with a remaining maturity of over 7 years account for only 7% of the market [27]. 3.3 Positive Impacts of FRB Issuance - For the bond market, the development of the FRB market meets the national requirement of "accelerating the development of a multi - tiered bond market", enriches market tools, and enhances market depth [30]. - For issuers, especially in a rate - cut cycle, issuing FRBs, especially credit FRBs, can reduce financing costs and avoid interest - rate risks. FRBs also help SMEs expand financing channels and reduce the risk premium required by investors for low - credit - rated enterprises [30][31]. - For investors, FRBs are effective tools to hedge against rising interest rates. They can buffer the decline in bond prices when interest rates rise. Additionally, FRBs can promote inclusive finance, such as through green bonds and Hong Kong's Silver Bonds [31].