1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Core Viewpoints of the Report - The end - of - quarter repatriation of bank wealth management is a definite trend, which may cause short - term disturbances to the credit bond market. However, considering the current support for the credit bond supply - demand structure and the expectation of loose funds around the quarter - end, the overall correction pressure on credit bonds is likely to be small. After the quarter - end, as the wealth management scale recovers, the demand for credit bond allocation may quickly recover [3][6][13]. - The short - term credit spread has been compressed to the lowest point this year, with relatively limited gaming space. Subsequently, the evolution of the asset shortage may gradually drive the duration market. The term spread has been trying to compress in the past two weeks, and there is still some room for compression of the medium - and long - term spread [3][13]. 3. Summary According to the Directory 3.1 Cross - Quarter Disturbance is Controllable, and the Duration Market is Gradually Emerging - Bank wealth management scale shows obvious characteristics of declining at the end of the quarter and rising at the beginning of the quarter, which is closely related to the end - of - quarter assessment pressure of banks and has an impact on credit spreads. At the end of the quarter, wealth management products need to repatriate some assets to meet regulatory indicators such as deposits, resulting in a decrease in wealth management scale and a weakening of credit bond allocation demand, which may lead to short - term selling pressure. After the quarter - end, as the wealth management allocation power recovers, the demand for credit bond allocation increases significantly, driving the credit spread to decline [3][6]. - In the second quarter, the net purchase scale of credit bonds by wealth management was not prominent, possibly related to the smooth valuation rectification. In April and May, the net purchase scale of credit bonds by wealth management was 51.1 billion yuan and 40.1 billion yuan respectively, the lowest in the same period in the past four years, with a year - on - year decline of 29.4% and 39.3%. On the contrary, bank wealth management bought a large number of certificate of deposit products in the second quarter, especially in May, with a net purchase scale of 261.5 billion yuan, a year - on - year increase of 68.2%. This change may be related to the valuation rectification and net value stabilization pressure of bank wealth management. In terms of institutional behavior, it shows that wealth management attaches more importance to the liquidity of positions and is more cautious in selecting credit bonds. Even if the repatriation scale exceeds the seasonality during the cross - quarter repatriation stage, the short - term selling pressure on credit bonds will be relatively controllable [3][8]. - In terms of supply, the supply scale of broad - based credit bonds in May this year was higher than that in previous years, and the month - on - month growth rate of issuance in June may be weaker than expected. The supply scale of broad - based credit bonds in May was 1.46 trillion yuan, a year - on - year increase of 27.4%. On the one hand, the issuance progress of bank secondary and perpetual bonds accelerated sharply in late April, and the issuance scale in May was close to 300 billion. On the other hand, due to the new policy of science and technology innovation bonds, there was a wave of concentrated issuance of science and technology innovation bonds in May, with an issuance of more than 360 billion yuan, the highest single - month issuance scale since 2022. Against the background of the relatively high - base supply in May this year, the month - on - month growth rate of credit bond issuance in June may be weaker than that in previous years, and the market impact caused by the increase in credit bond supply is limited [3][11]. 3.2 What Other Coupon Can be Explored Besides Lengthening the Duration? 3.2.1 Urban Investment Bonds - As of June 11, 2025, the scale of outstanding urban investment bonds was about 15.47 trillion yuan, including about 8.17 trillion yuan of public urban investment bonds, accounting for 53%. The scale of outstanding urban investment bonds with a valuation above 2.3% was 2.97 trillion yuan (933.445 billion yuan of public bonds), accounting for 19.23% of the total urban investment scale [17]. - In public urban investment bonds, Qinghai, Guizhou, Liaoning, Yunnan, and Shaanxi have relatively high weighted average valuation yields, all above 2.2%. Among the top ten provinces in terms of the scale of outstanding public urban investment bonds, Shandong, Sichuan, and Chongqing have relatively high valuation yields. In other large - scale public urban investment bond provinces, the yields of products within 3 years are mostly below 2%. In terms of spread performance, Shanghai and Beijing have the lowest average spreads, and the spreads in Jiangsu, Zhejiang, Guangdong, and Fujian are around 40BP. Among the top ten provinces in terms of stock, Shandong, Chongqing, and Hunan have relatively high spreads [17]. - In private urban investment bonds, Guizhou and Yunnan have a weighted average valuation yield above 3%. Among the top ten provinces in terms of the scale of outstanding private urban investment bonds, Shandong, Henan, Chongqing, and Sichuan have relatively high valuation yields, about 2.3 - 2.4%. In other large - scale private urban investment bond provinces, the yields of products within 3 years are mostly below 2.2% [18]. 3.2.2 Financial Bonds - As of June 11, 2025, the scale of outstanding financial bonds was about 14.42 trillion yuan. In terms of duration distribution, the average valuation yields of insurance sub - bonds in each duration interval within 5 years are relatively high; the average yields of bank secondary capital bonds and perpetual bonds within 3 years are below 2% [24]. - The scale of outstanding financial bonds with a valuation above 2.3% is 544.5 billion yuan, accounting for 3.8% of the total scale. Further divided by term, the scale of those with a valuation above 2.3% and a remaining term of less than 3 years is about 200.347 billion yuan, and the scale of those with a valuation above 2.3% and a remaining term of 3 - 5 years is about 340.12 billion yuan [24]. 3.2.3 Industrial Bonds - As of June 11, 2025, the scale of outstanding non - default industrial bonds was about 13.48 trillion yuan. The scale of outstanding bonds in the public utilities, non - bank finance, comprehensive, transportation, real estate, and building decoration industries exceeded one trillion yuan, among which the real estate and non - bank finance industries had relatively high average valuation yield levels [28]. - The scale of outstanding industrial bonds with a valuation above 2.3% is 1.5838 trillion yuan, accounting for 11.75% of the total scale. Considering both the stock scale and the proportion of high - valuation bonds, the real estate industry has the highest proportion of high - valuation bonds and the largest absolute scale, mainly concentrated in AAA products within 3 years (with a stock of about 289.6 billion yuan) [28].

Investment Rating - The industry investment rating is "Positive" (maintained) [1] Core Insights - The report highlights a recovery in wealth management growth in April, surpassing the highest point of 2024, with expectations for further growth in May [6][17] - The market share of wealth management is increasingly concentrated among wealth management companies due to stringent regulatory expectations, with small banks actively exiting the market [30][39] - The asset allocation is shifting towards bonds, with a slight increase in the proportion of bonds and non-standard assets, while cash and bank deposits continue to decline [47][50] Summary by Sections 1. Liability Side: Q1 Short-term Fluctuations, April Highs Surpass 2024 Peaks - As of the end of Q1 2025, the wealth management scale was 29.14 trillion yuan, a decrease of approximately 800 billion yuan from the beginning of the year [5][14] - The Q1 end reporting strength decreased year-on-year, but growth resumed in Q2 [19][6] - The best-performing category remains the "minimum holding period" type, which has seen significant growth due to its balance of liquidity and returns [24][5] 2. Asset Side: Passive Increase in Bond Holdings, Valuation Adjustments May Affect Risk Appetite - It is expected that the overall holding will continue to reflect a "decrease in deposits, increase in bonds" trend [47] - The proportion of cash and bank deposits has been declining for three consecutive quarters, while the proportion of bonds has slightly increased to 43.89% [47][48] - The proportion of wealth management supporting the real economy has dropped to below 70% [50] 3. Investment Recommendations - Wealth management subsidiaries of joint-stock banks can consolidate retail customer bases through differentiated advantages, with recommendations for Citic Bank and China Everbright Bank, while beneficiaries include China Merchants Bank and Industrial Bank [8]