1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report - Last week, the trends of interest - rate bonds and credit bonds diverged. Interest - rate bonds adjusted slightly, while credit bonds showed strong resilience and continued to recover, with ultra - long - term varieties having the highest repair degree [3][10][27]. - The market of Tier 2 capital bonds (Two - tier bonds) weakened, and the repair degree of the ultra - long - term part was weaker than that of other ultra - long - term credit bonds [4][17]. - The start of the ultra - long - term credit bond market was not driven by major non - bank institutions such as funds, wealth management, and insurance, so the sustainability of the market may not be stable. It is recommended that institutions with unstable liability ends avoid chasing the rise of ultra - long - term credit bonds. Instead, it is advisable to focus on short - and medium - term coupon sinking strategies [5][26][27]. 3. Summary by Related Catalogs 3.1 Market Performance of Interest - rate Bonds and Credit Bonds - From October 20 to October 24, 2025, the yields of 1Y, 2Y, 3Y, 4Y, and 5Y treasury bonds increased by 2.8BP, decreased by 0.2BP, increased by 1.5BP, increased by 2.2BP, and increased by 2.7BP respectively. In contrast, the yields of the same - term AAA and AA+ medium - term notes decreased [10][11]. - The yields of AAA/AA+ 10Y medium - term notes decreased by 5.77BP, the yields of AAA/AA+ 10Y urban investment bonds decreased by 5.86BP and 5.85BP respectively, the yield of AAA - 10Y bank secondary capital bonds decreased by 0.17BP, while the yield of 10Y treasury bonds increased by 2.40BP [3][12][13]. 3.2 Curve Shape and Yield Quantile Analysis - The steepness of the 1 - 2 - year and 2 - 3 - year yield curves of all ratings is the highest, and the 3 - 5 - year yield curve of low - grade bonds also has a relatively high steepness [13]. - In terms of the historical quantiles of absolute yields and credit spreads, the 4 - 5Y range still has a certain cost - performance [15]. 3.3 Market Situation of Two - tier Bonds - The market of Two - tier bonds weakened, with adjustments in the 2Y - 5Y range. The repair degree of the ultra - long - term part was weaker than that of other ultra - long - term credit bonds. The yields of 1 - 5 - year, 7 - year, and 10 - year AAA - bank secondary capital bonds changed to varying degrees [4][17]. - The buying interest in the active trading of Two - tier bonds was not weak, but the proportion of transactions below the valuation was not high, and the trading volume with a discount of more than 4BP was small [19][20]. 3.4 Market Situation of Ultra - long - term Credit Bonds - There were not many sell - side transactions of ultra - long - term credit bonds last week, and the discount transaction was not a panic - selling situation. The discount transaction proportion was between 0.00% and 17.50%, and the discount amplitude was mostly within 4BP [21]. - The coupon of ultra - long - term credit bonds has a certain cost - performance, and the proportion of high - activity transactions below the valuation continued to increase, remaining at a high level throughout the week [22]. 3.5 Institutional Behavior Analysis - Last week, public funds, wealth management, and insurance all reduced their net purchases of credit bonds compared with the previous week. Funds were net sellers of 5 - 30 - year credit bonds, with a net selling scale of 10.2 billion yuan [5][26]. - Other asset management products were net buyers of credit bonds, with a net purchase of 239.9 billion yuan, mainly increasing their holdings of 3 - 30 - year varieties, with a net purchase of 75.8 billion yuan [26].

Report Information - Report Type: Fixed Income Report - Release Date: June 26, 2025 - Analysts: Liang Weichao, Li Shukai [2] Core Viewpoints - The recent unexpected upsurge in the ultra - long - term credit bond market is mainly driven by the increasing demand from public funds and insurance funds. Short - term optimism is advisable, especially considering the potential expansion of bond ETF products and the possible improvement in the liquidity of ultra - long - term bonds. However, due to thin coupon protection and the vulnerability of public fund product liability, a quick - in - quick - out strategy may be a good choice [4][28][39] Summary by Directory 1. Ultra - long - term: How far can the market go? Market Performance - Since mid - June, the credit bond market has been on the rise, but the increase is generally lower than that of interest - rate bonds. Interest - rate bonds strengthened last week, with medium - and short - term bonds rising more and ultra - long - term bonds rising less. Credit bonds also rose, but medium - and short - term credit bonds had lower increases, while long - term credit bonds had higher increases than interest - rate bonds of the same term. Ultra - long - term credit bonds unexpectedly recovered, outperforming both same - term interest - rate bonds and general credit bonds [2][9][10] - From June 16 to June 20, 2025, the maturity yields of 1Y, 2Y, 3Y, 4Y, and 5Y treasury bonds decreased by 4.5BP, 4.7BP, 2.6BP, 2.9BP, and 4.2BP respectively. The yields of the same - term AAA medium - term notes decreased by 2.3BP, 0.1BP, 3.1BP, 3.3BP, and 2.7BP respectively, and the yields of AA+ medium - term notes decreased by 2.3BP, 0.1BP, 2.1BP, 3.3BP, and 0.6BP respectively. The yields of AAA/AA+ 10Y medium - term notes decreased by 4.0BP and 2.0BP respectively, and the yields of AAA/AA+ 10Y urban investment bonds decreased by 6.0BP and 9.0BP respectively, while the 10Y treasury bond yield only decreased by 0.4BP [9][10] Curve Shape - The steepness of the 1 - 2 - year period for medium - and high - grade bonds and the 2 - 5 - year period for low - grade bonds is the highest, but it has slightly decreased compared to the end of May, and the short - end remains relatively flat. Taking the yield term structure diagrams of AA+ medium - term notes and AA urban investment bonds as examples, the slopes of the 1 - 2 - year, 2 - 3 - year, and 3 - 5 - year intervals for AA+ medium - term notes are 0.0885, 0.0566, and 0.0603 respectively; for AA urban investment bonds, they are 0.0516, 0.0925, and 0.0775 respectively [11] Absolute Yield and Credit Spread - The coupon value remains low. In terms of credit spreads, there may be opportunities around the 3Y period. From June 16 to June 20, 2025, the estimated maturity yields of 1Y - AAA, 3Y - AAA, 1Y - AA+, 3Y - AA+, and 1Y - AA ChinaBond medium - and short - term notes are at the 7.93%, 4.48%, 5.86%, 4.13%, and 1.37% levels since 2024, at relatively low historical positions, with insufficient coupon protection. The historical quantiles of credit spreads for 1Y - AAA, 3Y - AAA, 1Y - AA+, 3Y - AA+, and 1Y - AA are 8.96%, 30.34%, 6.20%, 36.20%, and 4.82% respectively. After a week of adjustment, the short - end 1Y still has no cost - effectiveness, while the protection cushion for the 3Y period has strengthened [12] Perpetual Bonds - The perpetual bond market also warmed up, but the increase was not prominent. The increase of perpetual bonds within 5Y was similar to that of general credit bonds of the same term, and the performance of those with a term of 7Y and above was comparable to that of ultra - long - term credit bonds. From the perspective of the curve term structure, the curves for terms within 1 year and 7 years and above are relatively flat, and the steepness of the 2 - 6 - year curve is the highest, but the absolute slope is not extremely steep. The yields of 4 - 10Y AAA - bank secondary capital bonds decreased by 3.63BP, 2.39BP, 3.61BP, 4.07BP, 4.20BP, 4.48BP, and 5.10BP respectively. Currently, the curve is relatively close to the situation at the end of last year, and the yields of the ultra - long - term part of 7 years and above are already lower than those at the end of last year, and the gap from the lowest yield point since 2025 is less than 10BP [15] Active Trading - The trading sentiment was good throughout the week, but the market was not extremely hot. From June 16 to June 20, the proportion of low - valuation transactions of perpetual bonds was very stable, with a 100% proportion from Monday to Friday. The average trading durations were 5.08 years, 6.61 years, 6.57 years, 5.59 years, and 4.12 years respectively. The trading amplitude of perpetual bonds with low - valuation transactions was not large, generally within 3BP [18] Ultra - long - term Credit Bonds - Institutions' willingness to sell ultra - long - term credit bonds was very weak. From June 16 to June 20, the proportions of discounted transactions of ultra - long - term credit bonds were 0.00%, 7.50%, 2.50%, 0.00%, and 22.50% respectively. The discount amplitude was basically within 3BP, not a panic - selling situation. The market's willingness to buy ultra - long - term credit bonds increased significantly. The proportions of transactions below the valuation were 40.00%, 50.00%, 60.00%, 70.00%, and 60.00% respectively, making them the most popular credit products last week. Most of the transactions below the valuation were within 5BP [3][20][22] Considerations for Continuing to Participate - **Institutional Behavior**: The current market of ultra - long - term credit bonds is mainly driven by public funds, followed by insurance. Public funds have unstable liability ends, prone to a negative feedback loop. Since mid - to late May, funds and insurance have mainly been buying 7 - 10 - year credit bonds, with public funds being the most powerful buyers. The net buying scales of public funds in the second and third weeks of June were 4700 million and 5700 million yuan respectively, and those of insurance were 2000 million and 3100 million yuan respectively. However, in the short term, the buying demand and liquidity of ultra - long - term credit bonds may continue to improve, mainly due to the new forces of insurance and public ETF products [28][29] - **Product Comparison**: The yield difference between ultra - long - term credit bonds and interest - rate bonds of the same term is not sufficient, and interest - rate bonds have an obvious advantage in liquidity. As of June 20, the yield difference between 10YAAA, AA+ and 10Y treasury bonds is only about 10BP from the lowest point this year [32] - **Income Source**: Compared with the same period last year, the coupon protection of ultra - long - term bonds is significantly insufficient, but the proportion of coupon income contribution is higher than last year. However, the continuous low absolute yield weakens the anti - volatility ability of this product [35][38]