Core Viewpoint - The pricing power in China's bond market is undergoing a significant shift from trading desks to institutional investors, indicating a fundamental change in investment strategies and market dynamics [1][2][3]. Group 1: Pricing Power Shift - The report highlights that the pricing power of long-term and ultra-long-term bonds is transitioning from trading desks to institutional investors, reflecting a major reversal since 2022 [2][3]. - Prior to 2022, long-term bonds were not mainstream, and their pricing power was firmly held by institutional investors. However, post-2022, the market saw a shift towards longer durations as a dominant strategy due to various economic factors [3][4]. Group 2: Macro Logic Behind the Shift - The macroeconomic environment is changing fundamentally, with the central bank maintaining a cautious approach to interest rate cuts, leading to new narratives around asset allocation and inflation [4]. - The mismatch between fiscal and monetary supply durations is a primary issue, as fiscal expansion increases the net supply of bonds while the central bank's long-term funding is limited [6]. Group 3: Changes in Demand Structure - The demand structure for bonds is also evolving, with a weakening marginal demand from insurance institutions and banks increasingly taking on long-term bonds, leading to a more fragile demand for long-end bonds [7]. - The report suggests that the absorption of long-term supply pressure may require either adjustments to banking metrics or a significant drop in long-term bond prices to attract more institutional investment [7]. Group 4: Strategic Differentiation - The report emphasizes that the transfer of pricing power is reshaping the operational strategies of different types of funds, with trading funds advised to focus on short to medium-term strategies due to the increased difficulty in capital gains from long durations [9]. - Institutional investors are encouraged to remain patient and wait for optimal entry points as long-term assets undergo a revaluation process, while those with trapped positions should adopt a strategy of selling on rebounds to avoid deeper losses [9].