Group 1: Report Summary - Investment Rating: Not provided in the report - Core View: In the second half of 2025, credit bond investment should focus on three elements: the trend of funds and interest rates, the supply - demand pattern of credit bonds, and the cost - effectiveness of different varieties. Interest rates may continue to decline in a volatile manner, making the coupon value of credit bonds prominent, but the valuation volatility may increase. The overall supply of credit bonds may be difficult to expand, and the configuration demand may weaken from August to December. Different investment strategies are recommended for different periods and varieties [1][18] Group 2: 1. Steady Coupon as the Foundation, Grasp the Trading Rhythm 1.1. Short - to Medium - Duration Credit Spread Compression for Coupon Income, Seize Phased Opportunities in Long - Duration Bonds - H1 2025 Review: The credit bond market experienced an increase in yields and a widening of credit spreads from January to mid - March, followed by a rotation of the market to medium - to long - duration and then ultra - long - duration bonds from April to June. The main factors in the first quarter were the tight funds and the change in wealth management scale. In mid - to late March, the bond market recovered, driven by supply shrinkage and the cost - effectiveness of varieties. From April to June, the market was affected by interest rate fluctuations and the shift of the funds' central point [12][13] - June 2025 Highlights: The long - duration credit bond market was activated, mainly due to the compression of short - to medium - duration credit spreads to historical lows and the increased demand from funds, insurance, and other products. The scale of credit bond ETFs increased by 7.7 billion yuan in June, which also drove the demand for some long - duration component bonds [14][16] - H2 2025 Outlook: Interest rates may continue to decline in a volatile manner. The supply of credit bonds may be difficult to expand, with the decrease in urban investment bonds offset by the increase in industrial bonds. The wealth management scale usually increases significantly in July but weakens from August to December. The rectification of wealth management's net - value smoothing methods may suppress the demand for ultra - long - duration and low - rated medium - to long - duration bonds. It is recommended to increase positions in July, take profits in August, and reduce credit bond positions from August to December, switching to inter - bank certificates of deposit and interest - rate bonds [18][19][21] - Variety Cost - Effectiveness: The 10Y high - grade credit bonds have relatively large potential for credit spread compression. As of June 30, the credit spreads of 10Y high - grade medium - term notes are still 8 - 11bp higher than the average. Short - to medium - duration credit spread compression may still be the dominant strategy. Bonds with a yield of 2.0% - 2.2% in the 1 - 3 - year AA and AA(2) categories have high allocation value. High - grade 5 - year bonds can be considered when the credit spread adjusts to the mean + 1 standard deviation [22][30][35] 1.2. Grasp the Trading Rhythm of Bank Capital Bonds 1.2.1. Difficult for Bank Capital Bond Supply to Expand in H2 2025 - H1 2025 Review: The supply of bank capital bonds increased slightly. The net financing of secondary capital bonds increased year - on - year, while that of perpetual bonds decreased. The city commercial banks increased their issuance scale, while the supply from rural commercial banks was weak [39] - H2 2025 Outlook: The demand for new capital bonds from the Big Four banks may decrease after the capital injection in June. Although small and medium - sized banks may increase issuance if the cost is low, the overall net supply is difficult to expand [40] 1.2.2. Narrower Bandwidth for Band - Trading in Bank Capital Bonds, Reverse Trading May Yield Higher Win - Rates - H1 2025 Review: The yields of bank capital bonds showed differentiation. The yields of 1 - 5Y large - bank bonds generally increased, while those of 10Y secondary capital bonds and 1 - 4Y small - and medium - bank bonds mostly decreased. The credit spreads of most varieties compressed, with short - duration and low - grade bonds performing better [44] - H2 2025 Outlook: The bank capital bonds still have trading opportunities following interest - rate bonds, but the credit spread compression space is limited. Reverse trading (increasing positions during adjustments) may have a higher win - rate. The 4 - year and 6 - year bonds have higher riding yields and better holding experiences [50][51] Group 3: 2. Urban Investment Bonds: Negative Net Financing in H1, a Historical First - H1 2025 Supply: The supply of urban investment bonds shrank, with negative net financing for the first time in history. From January to June, the issuance was 2.9464 trillion yuan, a year - on - year decrease of 382.9 billion yuan, and the net financing was - 71.7 billion yuan, a year - on - year decrease of 218.5 billion yuan, mainly due to the tightening of bond - issuing policies [55] - Issuance Characteristics: The overall issuance sentiment was good, with a high proportion of over - subscribed issuances. The proportion of 3 - 5 - year issuances increased, while that of within - 1 - year issuances decreased. The issuance interest rates decreased overall, with greater declines in short - to medium - term bonds [55][56] - Regional Differences: The net financing performance of urban investment bonds varied by region. Most regions had negative net financing, mainly affected by district - level and park - level platforms. Guangdong and Shandong had relatively high positive net financing, while Jiangsu, Hunan, and Chongqing had large negative net financing [58] - Yield and Credit Spread: The yields of urban investment bonds generally decreased in H1, with high - grade long - duration and AA - low - grade bonds performing better. The credit spreads of all maturities and grades narrowed, with low - grade bonds performing more strongly [62][63] - Secondary Market: Since mid - March, the buying interest in the secondary market has been high, with a high proportion of TKN transactions and low - valuation transactions. There was a trend of increasing duration in transactions, and the proportion of AA(2) low - grade transactions remained high [66] Group 4: 3. Industrial Bonds: Supply Increase, Longer Durations in Both Primary and Secondary Markets - H1 2025 Supply: The issuance and net financing of industrial bonds increased year - on - year. From January to June, the issuance was 3.8718 trillion yuan, a year - on - year increase of 309.2 billion yuan, and the net financing was 1.0788 trillion yuan, a year - on - year increase of 40 billion yuan. The new regulations on science and technology innovation bonds contributed to the increase in issuance [18] Group 5: 4. Bank Capital Bonds: Low - Rated Bonds Perform Better, Weak Trading Sentiment - H1 2025 Performance: The yields of bank capital bonds showed differentiation, with short - duration and low - rated bonds performing better. The credit spreads of most varieties compressed, with 1 - 4Y small - and medium - bank capital bonds and 1 - 3Y AA - perpetual bonds having significant spread compression [44] - Trading Rhythm: The trading bandwidth of large - bank long - duration capital bonds has been narrowing, making band - trading more difficult. Reverse trading may be a better strategy. The 4 - year and 6 - year bonds have higher riding yields [48][51]