Group 1: Investment Ratings - No information provided on the report's industry investment rating Group 2: Core Views - As of December 12, controlling drawdown is the main strategic goal recently. In a market with slow rises and sharp falls in the past month, the focus is on drawdown control rather than achieving excess returns through duration + band operations [2][12] - Last week (December 8 - December 12), bond - type ETFs had a net inflow of 2.95 billion yuan, with credit - bond ETFs having a net inflow of 5.37 billion yuan, while interest - rate bond ETFs and convertible - bond ETFs had net outflows of 960 million yuan and 1.46 billion yuan respectively. Bond ETF net values are marginally recovering [3][16] - As of December 15, 2025, compared with the previous week, more than half of the non - financial and non - real - estate industrial bonds saw their yields rise, real - estate bond yields generally increased, and financial bond yields showed differentiation among bond types [4][18] - The trading preference for ultra - long - term credit bonds has not improved. The number of transactions of general credit bonds with a maturity of over 7 years remains at a low level, and the lack of spread protection space weakens investors' motivation [5][20] - In terms of the issuance pricing of local government bonds, the average issuance rate of 10 - year local bonds in the latest week was 2.05%, slightly up from the previous week. The average coupon rates of new 20 - year and 30 - year local bonds were above 2.45%, at a relatively high level within the year. The long - end spreads remain high [6][23] Group 3: Summary of Each Section Quantitative Credit Strategy - As of December 12, the cumulative excess returns of the short - end sinking strategy for urban investment bonds, the bullet strategy for commercial financial bonds, and the sinking strategy for securities firm bonds reached 5bp, 4.4bp, and 1.5bp respectively, while those of other medium - and long - term strategies were less than 5bp. The cumulative excess return of the urban investment dumbbell portfolio, which performed well in the previous two months, dropped to a low of - 25.7bp in the past four weeks. The sinking strategy of the financial bond heavy - position portfolio outperformed the corresponding duration strategy by more than 12bp in cumulative returns [2][12] ETF Strategy - Last week (December 8 - December 12), bond - type ETFs had a net inflow of 2.95 billion yuan. Credit - bond ETFs, interest - rate bond ETFs, and convertible - bond ETFs had net inflows of 5.37 billion yuan, net outflows of 960 million yuan, and net outflows of 1.46 billion yuan respectively. Compared with the previous week, their cumulative unit net value weekly growth rates were + 0.05%, + 0.08%, and + 0.20% respectively [3][16] Coupon Asset Heat Map - As of December 15, 2025, compared with the previous week, more than half of the non - financial and non - real - estate industrial bonds saw their yields rise. Except for private - placement bonds of private enterprises within 1 year, the yield adjustments of other varieties were less than 4BP. Real - estate bond yields generally increased, with the yields of non - perpetual bonds within 1 year rising by more than 5BP. Financial bond yields showed differentiation among bond types, with the yields of commercial financial bonds within 3 years mainly rising, bank sub - debt valuations generally recovering, and the performance of securities firm sub - debt being better than that of ordinary bonds [4][18] Ultra - long Credit Bond Tracking - The trading preference for ultra - long - term credit bonds has not improved. This week (December 8 - December 12, 2025), the number of transactions of general credit bonds with a maturity of over 7 years remained at a relatively low level of around 300. The spread between the most actively traded 7 - 10 - year industrial bonds and 20 - 30 - year treasury bonds is only 19.9bp, which further weakens investors' motivation [5][20] Local Government Bond Supply and Trading Tracking - In the latest week, the average issuance rate of 10 - year local bonds was 2.05%, slightly up from the previous week. The average coupon rates of new 20 - year and 30 - year local bonds were above 2.45%, at a relatively high level within the year. The long - end spreads of local government bonds remain high, with the average spread of bonds with a maturity of 10 years and above being higher than 20bp [6][23]

Group 1: Quantitative Credit Strategy - The recent medium to long-term strategies have shown strong cumulative returns, with perpetual bond duration, secondary bond bullet-type, and secondary bond duration strategies achieving cumulative excess returns of 13bp, 11.2bp, and 11.1bp respectively [2][12] - The secondary bond duration strategy has rebounded significantly, but its volatility is much higher than that of the downshift strategy, which has a cumulative return of 9.2bp, demonstrating both low volatility and strong recovery advantages [2][12] Group 2: ETF Trends - From October 13 to October 17, bond ETFs experienced a net outflow of 13.36 billion yuan, with credit bond ETFs, interest rate bond ETFs, and convertible bond ETFs seeing net outflows of 7.46 billion yuan, 4.96 billion yuan, and 0.94 billion yuan respectively [3][16] - In terms of performance, credit bond ETFs, interest rate bond ETFs, and convertible bond ETFs had weekly net value changes of +0.11%, +0.32%, and -1.77% respectively, indicating a significant pullback in convertible bond ETFs while credit and interest rate bond ETFs showed marginal recovery [3][16] Group 3: Yield Heatmap of Coupon Assets - As of October 20, 2025, the yields of non-financial and non-real estate corporate bonds have mostly declined, particularly for public offerings of private enterprises within one year [4][19] - The yields of financial bonds have generally decreased, with bank subordinated bonds performing well, especially the yields of 3-5 year perpetual bonds from state-owned banks and city commercial banks dropping by over 4.5bp [4][19] Group 4: Long-term Credit Bond Tracking - The number of transactions for long-term credit bonds has not increased significantly, with a total of 276 transactions for bonds with a duration of 7 years or more during the week of October 13 to October 17, indicating ongoing concerns about duration risk in the market [5][21] - The improvement in transaction numbers is more concentrated in secondary capital bonds and interest rate bonds, suggesting a cautious market sentiment towards long-term credit bonds [5][21] Group 5: Local Government Bond Supply and Trading - During the week of October 13 to October 17, 7-10 year local government bonds outperformed the same duration national and credit bonds, with indices for these bonds rising by 0.32% and 0.58% respectively [6][25] - The performance of bonds with a duration of over 10 years was weaker compared to national bonds, which saw a weekly increase of over 1% [6][25]

Quantitative Credit Strategy - The short-end perpetual bond strategy has shown defensive attributes, with excess returns of 13.3bp for city investment short-end, 7.2bp for commercial bank bullet-type bonds, and 6.6bp for bank perpetual bonds over the past four weeks [2][11] - City investment strategies have underperformed compared to perpetual bond strategies, with cumulative returns deviating from the benchmark by -10bp and -30bp for duration and barbell strategies respectively, while perpetual bond bullet-type and sinking strategies achieved around 5bp of excess returns [2][11] Duration Tracking of Bond Types - As of August 24, the weighted average durations for city investment bonds and industrial bonds are 2.01 years and 2.60 years respectively, while the durations for secondary capital bonds, bank perpetual bonds, and general commercial bank bonds are 4.30 years, 3.77 years, and 2.75 years respectively [3][15] - Bank perpetual bonds are at a historically low level, and other financial bonds have shown slight increases in duration, with securities company bonds and subordinated bonds at low historical percentiles [3][15] Yield Heatmap of Bond Types - As of August 25, the valuation yields and spreads of private enterprise industrial bonds and real estate bonds are higher than other types [4][18] - Non-financial and non-real estate industrial bond yields have generally increased, particularly for medium to long-term bonds, with a 4.8bp rise in 3-5 year state-owned enterprise private non-perpetual bonds [4][18] Long-term Credit Bond Tracking - The trading sentiment for long-term credit bonds remains low, with a decline in transaction volumes for 7-10 year industrial bonds and 10-year-plus credit bonds at yearly lows [4][22] - The yield adjustments for bonds over 7 years have exceeded 10bp, with the yield spread between 7-year city investment bonds and 20-30 year government bonds nearing 50bp [4][22] Local Government Bond Supply and Trading Tracking - A total of 369.2 billion yuan in local government bonds were issued in the week of August 18-22, including 239.3 billion yuan in new special bonds and 73.5 billion yuan in refinancing special bonds [5][25] - The main investment areas for special bond funds are "special new special bonds" and "ordinary/project income," with 550 billion yuan of special refinancing bonds issued in August, accounting for 5.6% of the month's local bond issuance [5][25]

Quantitative Credit Strategy - As of August 1, the secondary capital bond heavy strategy has rapidly recovered, with the weekly average yield of the credit style secondary bond heavy portfolio rising nearly 87 basis points, reaching the highest absolute return since April [2][12] - The secondary bond heavy and long-term industrial strategies showed significant recovery compared to other portfolios, with weekly returns of 0.31% and 0.51%, respectively, compensating for over 65% of the losses from the previous week [2][12] - Financial bond duration strategies generally outperformed, with secondary bonds, perpetual bonds, and brokerage bond duration portfolios beating the mid-to-long-term benchmark by approximately 9.2 basis points, 8.7 basis points, and 10.4 basis points, respectively [2][12] Duration Tracking of Varieties - The transaction duration of secondary capital bonds has risen to 4.8 years as of August 3, with urban investment bonds and industrial bonds weighted at 2.24 years and 3.03 years, respectively, both at over 90% historical percentile levels since March 2021 [3][14] - Among commercial bank bonds, the weighted average transaction durations for secondary capital bonds, bank perpetual bonds, and general commercial bank bonds are 4.79 years, 4.02 years, and 2.91 years, respectively, with bank perpetual bonds at a relatively low historical level [3][14] - For other financial bonds, the durations of securities company bonds, subordinated securities bonds, insurance company bonds, and leasing company bonds are 1.78 years, 2.37 years, 3.00 years, and 1.61 years, respectively, with securities company bonds and subordinated securities bonds at low historical percentiles [3][14] Yield Heat Map of Coupon Assets - As of August 4, the yields of non-financial and non-real estate industrial bonds have generally declined, with yields for 1-year and 2-3 year private enterprise public non-perpetual bonds down by 5.8 basis points and 6.7 basis points, respectively [4][19] - Real estate bonds also saw a decline in yields, with the yield drop for 3-year private enterprise public non-perpetual bonds exceeding 6 basis points [4][19] - In the financial bond sector, bank subordinated bonds are favored, particularly in the short end, with yields for 1-year shares and 1-2 year city commercial bank secondary capital bonds down by 11.5 basis points and 8.8 basis points, respectively [4][19] Long-term Credit Bond Insights - The issuance scale of long-term credit new bonds totaled 13.42 billion, with supply returning to a low level, possibly due to rising issuance costs, as long-term bond issuers await favorable issuance windows [5][21] - Correspondingly, the average issuance rate of long-term credit new bonds continued to rise, with the issuance rate of long-term urban investment bonds reaching over the 50th percentile for the first time in 24 years [5][21] Local Government Bond Supply and Trading Tracking - The average issuance rate of local bonds has marginally increased, with the yield spreads for 30-year, 20-year, and 10-year local bonds widening to 14 basis points, 12 basis points, and 11 basis points, respectively, compared to the same-term government bonds [6][22]

Group 1: Quantitative Credit Strategy - The recent performance of perpetual bonds and broker bonds strategies has shown a high success rate as of May 9 [2] - Short-term strategies yielded limited excess returns, while mid to long-term strategies, excluding city investment duration and barbell strategies, showed positive excess returns [2][12] - Financial bonds and non-financial credit heavy strategies have widened the gap in cumulative excess returns over the past four weeks, particularly with increased yield elasticity in financial bond duration strategies [2][12] Group 2: Duration Tracking of Various Bonds - As of May 9, the weighted average transaction duration for city investment bonds and industrial bonds reached 2.09 years and 2.51 years respectively, both above the 90th percentile since March 2021 [3][15] - The weighted average transaction durations for secondary capital bonds, perpetual bonds, and general commercial bank bonds are 4.19 years, 3.59 years, and 2.30 years respectively [3][15] - Other financial bonds such as securities company bonds and insurance company bonds have varying durations, with some at historically low levels and others at high levels [3][15] Group 3: Yield Heatmap of Credit Assets - As of May 12, the valuation yield and spread of private enterprise real estate bonds are higher than other types of bonds [4][17] - Non-financial, non-real estate industrial bonds saw a yield decline of around 10 basis points, particularly in the one-year category [4][18] - Financial bonds with high valuation yields include leasing company bonds and securities subordinate bonds, with significant yield declines noted in certain categories [4][18] Group 4: Long-term Credit Bond Insights - The market shows weak willingness to increase long-duration credit bonds, despite the approaching low yields of government bonds and short-term assets [5][20] - Transaction volumes for mainstream long-duration industrial bonds have increased but remain below levels seen in late March, indicating insufficient trading sentiment to support long-term bond markets [5][20] - The recent week saw a decline in the transaction share of long-term credit bonds, falling below 70% [5][20] Group 5: Local Government Bond Supply and Trading Insights - The average coupon rates for 10-year, 20-year, and 30-year local government bonds are 1.79%, 2.07%, and 2.05% respectively, with varying spreads [6][23] - The liquidity in the interbank market remains reasonably ample, with moderate issuance volumes of local bonds, leading to stable supply pressure [6][23] - Long-term spreads continue to widen, but adjustments have led to a more stable outlook [6][23]

Investment Rating - The industry investment rating is not explicitly stated in the provided documents, but it follows a relative rating system based on performance against the CSI 300 index [6]. Core Viewpoints - The bond market has been experiencing a continuous pullback since February, leading to weakened trading sentiment. Institutions with liquidity needs and sensitivity to net value are advised to adopt a cautious approach and selectively allocate investments [4]. - Market expectations for interest rate cuts have shifted post the Two Sessions, causing potential adjustments in the long-end of the bond market [4]. - The report emphasizes a focus on ultra-long credit bonds and provides a market outlook [4]. Summary by Sections Market Overview - On Thursday, the Shanghai Composite Index fell by 0.4%, with the CSI 300 also down by 0.4%. The ChiNext Index decreased by 1.2%, while the Hang Seng Index dropped by 0.6% [3]. - The best-performing sectors included coal (+4.2%), beauty and personal care (+1.6%), steel (+1.2%), utilities (+0.9%), and oil and petrochemicals (+0.8%). Conversely, the worst-performing sectors were machinery (-2.6%), electronics (-2.4%), computers (-2.1%), automobiles (-1.9%), and media (-1.8%) [2][3]. Important Insights - The report discusses the ultra-long credit bonds market, indicating that the peak is approaching and suggesting a selective allocation strategy [4]. - The market's delayed pricing of interest rate cuts may lead to further adjustments in the long-end of the bond market [4]. - The report highlights the impact of a strong equity market on the bond market, suggesting a need for cautious positioning [4].