Group 1 - The article focuses on the unexpected fiscal increment policies announced by the Ministry of Finance, highlighting their implications for economic stability and growth [3][4]. - Two significant fiscal policies were introduced: a 500 billion new policy financial tool aimed at supporting innovation, consumption, and foreign trade, and an additional 500 billion allocated from local government debt limits to support local projects [4][5]. - Compared to last year, the total fiscal increment is notably larger, with a combined funding scale approaching 1 trillion, and the structural usage of funds has expanded to include support for major economic provinces [5][6]. Group 2 - The core background for these policies includes pressure on macroeconomic data from June to August, characterized by declines in manufacturing investment and retail sales, necessitating timely fiscal responses [6]. - The head provinces have not fully leveraged their potential to drive economic growth, as indicated by the lack of correlation between debt resolution quotas and infrastructure investment growth [6][9]. - The verification of the effectiveness of these fiscal policies will focus on monitoring leading economic indicators and assessing whether the supply-demand structure can improve price expectations [9].

1. Report Industry Investment Rating There is no information provided regarding the report industry investment rating. 2. Core Viewpoints of the Report - The bond market is still "widely bearish," but it is likely to be a bull market. The upper limit of bond market interest rates is clear. The 10 - year Treasury bond rate above 1.8% has absolute value, and the downward space of bond market interest rates is at least 20bp. There are opportunities for the narrowing of the spreads of ultra - long bonds and variety spreads [2]. - The logic of the upper limit of interest rates comes from the weak fundamentals, asset shortage, and the need to cooperate with fiscal policies. The large - scale purchase of 7 - 10y Treasury bonds by large banks in mid - September may reflect the policy intention of maintaining stability in the bond market [2][8]. - Regarding the lower limit of interest rates, the report is firmly bullish. The 1.7% is not an important resistance level. Interest rates are expected to reach new lows under the influence of factors such as the central bank's possible restart of Treasury bond trading, regulatory policies being less than expected, and cross - year allocation [11][12]. - The term spreads in the bond market since 2024 have generally widened, different from the previous narrowing trend. In the future, with the improvement of market sentiment, there will be opportunities for spread compression. The impact of the 500 billion yuan local government debt limit on the bond market is expected to be limited in the short term [3]. 3. Summary According to the Table of Contents 3.1 Is It a Sideways Market or a Bull Market? - There are still significant differences in the market. The short - term view of most investors is that the downward space of interest rates is limited. The lower limit of the 10 - year Treasury bond active bond rate may be 1.7%, and the upper limit is around the previous high of 1.83% [7]. - The long - term view believes that short - term Sino - US trade frictions are beneficial, and the negative factors in the third quarter are weakening. The short - term view believes that Sino - US relations may improve, the stock market is still strong, and regulatory policies will affect the bond market [7]. - The upper limit of interest rates: The 10 - year Treasury bond above 1.8% and the 30 - year Treasury bond above 2.1% have absolute allocation value. The upper limit comes from the weak fundamentals, asset shortage, and the large - scale purchase of 7 - 10y Treasury bonds by large banks in mid - September, which may be a manifestation of the central bank's intention to maintain stability in the bond market and cooperate with fiscal policies [8]. - The lower limit of interest rates: The report is firmly bullish. The 1.7% is not an important resistance level. Interest rates are expected to reach new lows under the influence of factors such as the central bank's possible restart of Treasury bond trading, regulatory policies being less than expected, and cross - year allocation. In extreme cases, the 10 - year Treasury bond rate can refer to the pricing at the beginning of this year plus points, that is, OMO + 10bp [11][12]. 3.2 How to View Spreads in a Sideways Market? - By tracing the sideways markets since 2022 with the 10 - year Treasury bond yield as the standard, 7 time periods are sorted out. Since 2024, the term spreads in the sideways market have generally widened, mainly because the bond bull market since 2024 is usually accompanied by supply pressure or the central bank's attention to long - term interest rates, making the mid - short end relatively safer and more certain [19][24]. - In terms of variety spreads, the spread between policy - financial bonds and Treasury bonds usually narrows, especially at the long end. The credit spreads have decreased significantly in most sideways markets [25]. - Since the end of August 2025, the spread between 5 - year and 2 - year Treasury bonds has declined, while the spreads between 10 - year and 5 - year, and 30 - year and 10 - year Treasury bonds have increased, and the variety spreads have increased rapidly. The reasons include large - scale purchases of medium - term Treasury bonds by large state - owned banks, the reduction of fund duration by public funds, and the weak buying of ultra - long bonds by large and medium - sized banks [31][33]. - Looking forward, the 30 - year Treasury bond rate has a greater downward space, and the variety spreads may also narrow. Insurance funds may increase their purchases of ultra - long bonds when the Treasury bond rate rebounds above 2.1%. With the improvement of bond market sentiment and the end of the cross - quarter period, the buying power of funds and rural commercial banks may return, driving the compression of the spread between policy - financial bonds and Treasury bonds [36]. 3.3 How to View the Impact of 500 Billion Yuan of Local Government Debt Balance on the Bond Market? - In the absence of other incremental policy linkages, the impact of 50 billion yuan of special bonds on the bond market is limited. In 2022, the interest rate fluctuated upward due to a series of incremental policies, including fiscal, monetary, and structural policies [37][38]. - This 500 billion yuan of funds is likely to be issued in the form of new special bonds. Currently, the balance of general bonds is not large, and the use of this fund is more suitable for new special bonds [43]. 3.4 Bond Market Interest Rates First Rose and Then Fell - This week, the central bank's open - market operations changed from net investment to net withdrawal, but the liquidity in the market became looser. The bond market yield curve flattened as a whole, and the 10 - year Treasury bond yield first rose and then fell, rising 0.40bp to 1.82% [3][45]. - The reasons for the fluctuations in bond market interest rates include factors such as "TACO trading," good export performance, increased redemption pressure, market speculation on public fund fee reform, and the possible issuance of local government bonds in advance in 2026 [45]. 3.5 The Scale of Wealth Management Products Slightly Increased - As of October 12, the scale of existing wealth management products reached 30.9 trillion yuan, with a weekly increase of 120.652 billion yuan. From October 6 to October 12, the newly issued wealth management products totaled 14.68 billion yuan [55]. - In the second week of October, the scale of fixed - income products rebounded. By product type, the scale of cash - management products increased by 15.8 billion yuan, and the scale of fixed - income products increased by 41.7 billion yuan. By product risk level, the scale of first - level (low - risk) products increased by 5 billion yuan [59][60]. - The net - breaking rate of wealth management products decreased slightly last week. As of October 15, the average 7 - day annualized yield of 370 money funds was 1.05%, and the average 7 - day annualized yield of 265 cash - management products was 1.35% [60][62]. 3.6 Duration - This week, the duration of public funds decreased at first and then increased. From October 13 to October 17, the duration of public funds increased by 0.035 to 2.382 compared with October 10, and the weekly average was 2.364 [64]. - This week, the divergence of duration decreased, and the market's consensus expectation increased slightly. On October 17, the divergence of public fund duration decreased by 0.014 to 0.321 compared with October 10 [64].

Core Viewpoint - The Ministry of Finance has allocated an additional 500 billion yuan to local governments from the debt balance limit, aimed at enhancing local fiscal capacity and supporting economic recovery amid complex domestic and international conditions [1][2]. Group 1: Financial Policy and Debt Management - The allocation of 500 billion yuan is part of a broader strategy to manage local government debt, with the total debt balance as of August reaching 53.2484 trillion yuan against a limit of 57.9874 trillion yuan, indicating a remaining balance limit of 4.73903 trillion yuan [1]. - This move allows local governments to issue an additional 500 billion yuan in government bonds in the fourth quarter, which will be used to bolster financial resources [1][2]. - The current year's debt issuance plan includes a total of 5.2 trillion yuan, with approximately 4.35 trillion yuan already issued by the end of September, achieving an 83% completion rate [2]. Group 2: Economic Impact and Objectives - The additional funds will not only support local governments in addressing existing debts and overdue payments to enterprises but also facilitate project construction in economically significant provinces [2]. - The Ministry of Finance aims to expedite the use of this debt balance limit to reinforce the positive trend in economic recovery and assist local governments in meeting their economic and social development targets for the year [2]. - Local fiscal revenue has shown slow growth, with general public budget revenue increasing by 1.8% to 930.39 billion yuan, while government fund revenue has decreased by 0.6% to 27.441 billion yuan in the first three quarters [3].

Core Viewpoint - China's proactive fiscal policy is aimed at promoting stable economic operation, with a significant increase in fiscal spending despite a slight decline in fiscal revenue [1][3]. Fiscal Revenue and Expenditure Overview - In 2025, the broad fiscal revenue is projected to be 11.2 trillion yuan, a year-on-year decrease of approximately 1.3%, while broad fiscal expenditure is expected to reach 14.5 trillion yuan, an increase of about 6.6% [1]. - The fiscal deficit is expected to be 3.3 trillion yuan, a year-on-year increase of 46.5%, which will be compensated through government borrowing [1][11]. Tax Revenue Analysis - The general public budget revenue for the first five months of the year is 9.7 trillion yuan, showing a slight decline of 0.3% year-on-year, with tax revenue at 7.9 trillion yuan, down 1.6% [3][4]. - The decline in tax revenue is attributed to multiple factors, including difficulties faced by some enterprises and a sluggish real estate market [4][6]. Non-Tax Revenue Trends - Non-tax revenue for the general public budget increased by 6.2% year-on-year to 1.7 trillion yuan, although it showed a decline in May compared to the same period last year [4][6]. Government Bond Issuance - To maintain fiscal spending, the government has accelerated the issuance of government bonds, with 6.29 trillion yuan issued in the first five months, a year-on-year increase of 38.5% [7][8]. Fiscal Spending Focus - Fiscal spending in the first five months reached 11.3 trillion yuan, a year-on-year increase of 4.2%, with significant allocations towards social security, employment, and education [8][10]. - The central government has expedited transfer payments to local governments to support basic livelihood guarantees [8]. Future Fiscal Policy Directions - The government plans to implement additional fiscal policies as needed, particularly in the second half of the year, to meet economic development goals [11][12]. - There is an emphasis on establishing a childcare subsidy system and addressing investment shortfalls through new policy financial tools [12].

Group 1 - The core viewpoint of the article emphasizes China's implementation of targeted fiscal policies to boost economic recovery and enhance social confidence, particularly through systematic design and integrated innovation [1][3][5] Group 2 - In the first two months of the year, key economic indicators such as industrial added value, retail sales of consumer goods, and fixed asset investment grew by 5.9%, 4%, and 4.1% year-on-year, respectively, surpassing last year's growth rates [3][5] - The fiscal policies focus on stabilizing growth, adjusting structure, benefiting people's livelihoods, and preventing risks, with an emphasis on counter-cyclical adjustments to achieve qualitative and reasonable quantitative growth [5][9] - The government plans to utilize various fiscal tools, including national and local government bonds, to support state-owned banks and promote consumption through initiatives like trade-in programs [7][11] Group 3 - The article highlights China's commitment to new industrialization, emphasizing the integration of technological and industrial innovation to foster new productive forces [14][16] - By 2025, the government aims to enhance high-quality technological supply and implement key development actions in manufacturing, particularly in emerging fields like humanoid robots and atomic-level manufacturing [16][18] - The government will also support foreign enterprises in establishing R&D centers in China and collaborating with domestic companies to drive innovation [16][20]