1. Report Industry Investment Rating - The rating for Treasury bonds is "Oscillation" [5] 2. Core Views of the Report - In September, economic data continued to weaken, with supply still exceeding demand. The policy in Q3 focused more on structural adjustment than on stabilizing growth. Although this shift brought some positive results, the problem of insufficient endogenous growth momentum in China remained unsolved, and the fading policy effectiveness led to a further weakening of economic data [1][9][10]. - Policy is moderately proactive. The economic growth rate in Q4 is expected to have a small fluctuation range, and the overall economic growth rate this year is high in the first half and low in the second half. As policy effectiveness gradually emerges, the pressure of weakening demand will be partially offset. The bond market sentiment has significantly improved compared to Q3. After the Fourth Plenary Session, as incremental policies are exhausted, the influence of fundamentals on the bond market will reappear, and Treasury bond futures are expected to have a relatively smooth recovery [2][11]. - The bond market is expected to turn from weak to strong, and the yield curve is expected to flatten. During the Fourth Plenary Session, there were relatively many policies, so it is advisable to stay cautious. In November, if the new regulations on fund fees are not considered, incremental policies will be relatively limited. The bond market is expected to refocus on fundamentals and experience a relatively smooth recovery, with the curve oscillating and flattening [3][40] 3. Summary by Relevant Catalogs 3.1 9 - Month Economic Data: Continued Weakening with Supply Exceeding Demand - **Overview of Economic Data**: In September, industrial added - value (工增) increased by 6.5% year - on - year, retail sales of consumer goods (社零) increased by 3.0% year - on - year, and the cumulative year - on - year growth rate of fixed - asset investment from January to September was - 0.5%. The Q3 GDP growth rate was 4.8%, slightly exceeding market expectations [9]. - **Structural Analysis**: Exports were stronger than domestic demand, supply was stronger than demand, and the new economy continued to outperform the old economy, but the investment growth rate of some new economy sectors was also slowing down [1][10]. 3.2 Demand Side 3.2.1 Investment: Cumulative Growth Rate Turns Negative - **Fixed - Asset Investment**: The cumulative year - on - year growth rate of fixed - asset investment from January to September was - 0.5%, and private investment growth rate was - 3.1%, both showing a downward trend [12]. - **Manufacturing Investment**: The cumulative investment growth rate in manufacturing from January to September was 4.0%, and the growth rate in September was - 1.9%, continuing to decline. In the future, the manufacturing investment growth rate is likely to decline with resilience, but the decline rate is relatively controllable [15][16]. - **Infrastructure Investment**: The cumulative growth rate of broad - based infrastructure from January to September was 3.34%, and the narrow - based infrastructure growth rate was 1.1%. The infrastructure growth rate continued to decline but is expected to rise slightly in the future [19]. - **Real Estate Investment**: In September, real estate data continued to weaken. The growth rate of real estate development investment from January to September was - 13.9%. The real estate market's endogenous recovery momentum is insufficient, and the process of stabilizing and rebounding is expected to be tortuous [24][25]. 3.2.2 Consumer Demand: Declining Income and Retail Sales Growth - **Retail Sales Growth**: In September, retail sales of consumer goods increased by 3.0% year - on - year, with a negative month - on - month growth rate. The growth rate of residents' disposable income decreased, and the propensity to consume also declined. The growth momentum of retail sales of consumer goods is weak this year [28][30]. 3.3 Production Side - **Industrial Production**: In September, industrial added - value increased by 6.5% year - on - year, with a relatively fast growth rate. Exports showed resilience, driving production. However, in the future, terminal demand may be weak, which will drag down production, but total supply is unlikely to shrink significantly in Q4 [31][38][39]. 3.4 Bond Market Outlook - **Short - Term Factors**: In the short term, policies and Sino - US trade relations are the main factors affecting the bond market. It is recommended that trading desks adopt a cautious approach [40]. - **Mid - to - Long - Term Outlook**: From late October to November, the bond market is expected to turn from weak to strong. The bond market is expected to oscillate and recover, and the yield curve is expected to flatten [40]. - **Strategies**: For the unilateral strategy, be cautious in short - term trading this week and look for opportunities to build long - term long positions on dips. For the hedging strategy, short - hedgers should wait and see. For the curve strategy, continue to focus on flattening the curve [41][42]

Report Industry Investment Rating - The rating for Treasury bonds is "Oscillation" [5] Core Viewpoints of the Report - The economic fundamentals will gradually face pressure, and the fundamental situation is favorable for the bond market. It is advisable to maintain the strategy of buying on dips. In the medium to long term, the probability of making profits by going long on long - term bonds is high, but the potential return is relatively limited. Therefore, the strategy of buying on dips is more cost - effective [3][35] - The economic data in Q2 may decline moderately, and the pressure on economic decline will become more apparent in Q3. It is expected that China will introduce incremental policies to address this situation at that time [2][11] Summary by Relevant Catalogs 1. Increase in Internal and External Pressures, Most Economic Data Falling Short of Expectations - **Q1 Economic Data Strength Logic**: The strong performance of Q1 economic data was mainly due to two reasons: the beginning of the year is the peak demand season for sectors such as real estate, and policy efforts further stimulated market demand; enterprises had a strong motivation to rush exports, and the export industry chain showed resilience. However, both logics had issues of poor sustainability [1][9][10] - **April Economic Data Weakening**: In April, most economic data weakened compared to the previous period. The year - on - year growth rate of industrial added value in April was 6.5%, with an expected value of 6.1% and a previous value of 7.7%; the year - on - year growth rate of social retail sales in April was 5.1%, with an expected value of 5.5% and a previous value of 5.9%; the cumulative year - on - year growth rate of fixed - asset investment from January to April was 4%, with an expected value of 4.2% and a previous value of 4.2%. After the data was released, Treasury bond futures fluctuated and rose [9] - **Future Economic Trend**: The economic data in Q2 may decline moderately, and the pressure on economic decline will become more obvious starting from mid - year. Fiscal policy is the key to hedging against the weakening external demand. It is expected that China will introduce incremental policies in Q3, and policies will become the focus of market speculation at that time [2][11] 2. Production End: Both Industrial and Service Production Show Weakening Resilience - **Industrial Production**: In April, the year - on - year growth rate of industrial added value was 6.5%, with an expected value of 6.1% and a previous value of 7.7%. The growth rate of industrial production is weakening. The decline in the growth rate of export delivery value and the weakening of terminal demand such as external demand have dragged down production performance. Policy support has prevented a significant decline in the year - on - year growth rate of industrial added value. Looking forward, the weakening of external demand will have a more obvious impact on industries with high export dependence, but policies such as "two new" will support the production end, and the decline in the year - on - year growth rate of industrial added value is expected to be limited [12][13] - **Service Production**: In April, the service production growth rate was 6.0%, with a previous value of 6.3%. Weak service consumption and unstable economic recovery expectations have negatively affected service production. In the future, the production growth rate is expected to decline slightly. Although terminal demand is weak, policies to boost service consumption are expected to prevent a significant decline in the service production growth rate [13] 3. Demand End: Both Manufacturing and Infrastructure Growth Rates Decline Slightly, and Real Estate Data Deteriorates Marginally Again - **Manufacturing Investment**: From January to April, the cumulative manufacturing investment growth rate was 8.8%, with a previous value of 9.1%; in April, the monthly manufacturing investment growth rate was 8.2%, with a previous value of 9.2%. The decline in manufacturing investment growth rate is due to weak terminal demand and low corporate investment and financing willingness. However, policies such as equipment renewal have limited the decline. In the future, manufacturing will continue to grow at a high speed, but there will be obvious structural differentiation [18][19] - **Infrastructure Investment**: From January to April, the cumulative growth rate of broad - based infrastructure was 10.85%, with a previous value of 11.5%; the narrow - based infrastructure growth rate was 5.8%, with a previous value of 5.8%. In April, the monthly broad - based infrastructure growth rate was 9.57%, with a previous value of 12.58%. Infrastructure growth is gradually declining from a high level. The slow issuance of new special bonds and the decline in investment growth rates of some central - led infrastructure industries have led to the weakening of infrastructure growth in April. In the short term, infrastructure growth may face a slight downward pressure, but it is expected to rise again with subsequent policy support [22][23] - **Real Estate Market**: Most real estate indicators showed a decline again. Weak consumer willingness to buy houses and tight corporate funding sources have led to a decline in real estate investment. In the short term, the probability of directly introducing strong policies to stimulate real estate demand is low. The core idea of stabilizing the real estate market is to increase effective supply to stimulate effective demand. In the short term, real estate data may continue to weaken, and the impact of incremental fiscal policies on the real estate market in Q3 can be observed [26][27] - **Social Retail Sales**: In April, the social retail sales growth rate was 5.1%, with an expected value of 5.5% and a previous value of 5.9%. The decline in automobile and other large - scale consumer goods sales has dragged down the social retail sales growth rate. Different types of consumer goods show differentiated performance. In the future, social retail sales still face pressure due to high macro - environmental uncertainty and low probability of direct policies to improve residents' cash flow statements [30][31] 4. Fundamental Factors Favor the Bond Market, Maintain the Strategy of Buying on Dips - **Bond Market Outlook**: Due to the poor sustainability of the previous logics driving economic data improvement, future economic fundamental pressure will gradually emerge, which is favorable for the bond market. In the medium to long term, the probability of making profits by going long on long - term bonds is high, but the potential return is relatively limited. Therefore, the strategy of buying on dips is more cost - effective [3][35] - **Monetary Policy and Yield Curve**: The future fundamental pressure will gradually emerge, and the pressure of exchange - rate depreciation is relatively controllable. The probability of overall loose monetary policy is high. It is expected that the central level of capital interest rates will decline slightly, and the capital market will be in a state of balanced and slightly loose. The current yield curve is relatively flat and is expected to gradually steepen in the future [35][36] - **Investment Strategies**: In the medium term, there is still a bullish outlook. It is recommended to pay attention to the strategy of deploying medium - term long positions on dips. The opportunities for futures positive arbitrage have significantly decreased, and only some contracts still have slight positive arbitrage opportunities. Opportunities to steepen the curve have initially emerged, and subsequent changes in capital interest rates need to be closely monitored [38]