Market Overview - The bond market experienced fluctuations and a pullback on August 28, with government bond futures closing lower across the board, particularly in the long-end segment [1][2] - The interbank bond yield rose by approximately 2 basis points, indicating a shift in market sentiment [1][2] Bond Yield Movements - The 30-year government bond yield increased by 2.1 basis points to 2.015%, while the 10-year government bond yield rose by 2 basis points to 1.875% [2] - The 10-year government bond with interest saw a yield increase of 1.25 basis points to 1.7775% [2] Market Activity - The China Securities Convertible Bond Index rose by 0.19%, with a trading volume of 110.826 billion yuan [2] - Notable gainers in the convertible bond market included Chongda Convertible Bond and Weida Convertible Bond, with increases of 12.03% and 11.29% respectively [2] International Bond Market - In North America, U.S. Treasury yields fell across the board, with the 2-year yield dropping by 6.19 basis points to 3.611% [3] - In Asia, Japanese bond yields mostly declined, with the 10-year yield down by 0.9 basis points to 1.619% [3] - In the Eurozone, the 10-year French bond yield rose by 2 basis points to 3.516%, while the 10-year German bond yield fell by 2.3 basis points to 2.698% [3] Primary Market Results - The China Development Bank's 3-year and 7-year financial bonds had winning yields of 1.6355% and 1.8209%, respectively, with bid-to-cover ratios of 2.87 and 4.28 [4] - Inner Mongolia's local bonds showed strong demand, with bid-to-cover ratios exceeding 23 times for both 10-year and 15-year bonds [4] Liquidity and Funding - The People's Bank of China conducted a reverse repurchase operation of 416.1 billion yuan at a rate of 1.40%, resulting in a net injection of 163.1 billion yuan for the day [5] - Short-term Shibor rates increased, with the overnight rate rising by 0.1 basis points to 1.316% [5] Institutional Insights - CITIC Securities noted that the bond market is experiencing a bear steepening phase, driven by market sentiment rather than economic fundamentals [7] - Longjiang Fixed Income highlighted the diversification of funding sources in the convertible bond market, with banks and insurance funds playing a significant role [7] - Guosheng Fixed Income pointed out that recent market adjustments have made short-term brokerage subordinated bonds more attractive, suggesting a focus on investment value in this segment [7]

Group 1 - The core strategy for Q3 focuses on building a short-end position while exploring the "convex points" of the yield curve, emphasizing the need to maintain duration and avoid overly short positions [7][11] - The report highlights that the short-end strategy is the most certain, but it lacks significant yield enhancement potential, necessitating a continued extension of duration to contribute to returns [11][12] - The performance of credit bonds in Q2 was influenced by unstable funding conditions, with a shift to a more optimistic sentiment in May and June, leading to a rapid compression of liquidity premiums in ultra-long credit bonds [7][11] Group 2 - For bonds with maturities within 3 years, it is recommended to focus on areas with good liquidity, as high-yield issuers are scarce and low-rated municipal bonds are already undervalued [12][14] - The report suggests that the yield curve steepens beyond 3 years, indicating opportunities to extend duration in the 3-5 year segment, particularly in regions with acceptable liquidity [7][12] - The supply-demand dynamics support the continued exploration of niche products, with perpetual bonds in the 4-5 year range being a good choice for enhancing portfolio yields [7][12] Group 3 - The Q2 review indicates a shift in market sentiment from cautious to optimistic, with a decrease in the issuance of municipal bonds and a monthly net financing scale of approximately 500 billion yuan [7][8] - The report notes that the trading environment for short-end bonds has become crowded, with the market increasingly seeking returns from liquidity [7][8] - Credit risk perceptions have lightened, with a decrease in new public sentiment points related to credit risk in Q2, suggesting a stable risk environment [7][8]