Report Industry Investment Rating No information provided. Core Viewpoints - The bond market will continue to recover in a volatile manner, and the recovery may be smoother in the latter part of the fourth quarter. The 10-year Treasury bond yield (old active bond) is expected to recover to the pre-adjustment level of 1.6%-1.65% by the end of the year [3][18]. - Financial "anti-involution" will affect asset supply and demand and interest rates in the future. It may lead to a slowdown in loan growth and a continuous decline in deposit rates, which will ease the pressure on banks' net interest margins [1][7]. - The decline in deposit rates will widen the space for interest rate cuts and increase the necessity for them. If banks shrink their balance sheets, the asset shortage may intensify [2][14]. Summary by Relevant Content Bond Market Trends - This week, the bond market remained volatile, with limited changes in interest rates across various tenors. The 10-year and 30-year Treasury bond yields changed slightly by 0bps and -1.0bps to 1.81% and 2.15% respectively, while the 3-year and 5-year secondary capital bond yields decreased by 2.8bps and 2.7bps to 1.91% and 2.15% respectively [1][6]. - The bond market's volatility is due to the weakening fundamentals and loose funds supporting the bond market's strength, while the cautious behavior of banks and other institutional investors restricts the market's decline in the short term. As the end of the year approaches, banks' demand for bond allocation is expected to recover, driving interest rates down [1][6]. Impact of Financial "Anti-involution" - Bank "involution" competition is manifested in the rapid decline in loan interest rates and the slow decline in deposit interest rates, which compresses banks' net interest margins. Financial "anti-involution" aims to slow down the decline in loan interest rates and accelerate the decline in deposit interest rates [7]. - On the loan side, "anti-involution" may lead to a further decline in loan volume if the decline in loan interest rates is slowed or stopped. There is a possibility of a continuous slowdown in loan growth in the coming months [1][9]. - On the deposit side, deposit interest rates are expected to continue to decline in the future, which will ease the pressure on banks' net interest margins. It is estimated that the average deposit cost of listed banks will continue to decline by 13bps from mid-this year to mid-next year [1][11]. Impact on Interest Rate Policy - The decline in deposit rates will widen the space for the central bank to cut interest rates and increase the necessity for it. The probability of OMO and LPR cuts will increase [2][14]. Impact on Asset Shortage - If banks shrink their balance sheets in an "anti-involution" environment, it may lead to a simultaneous contraction of corporate financing and corporate deposits, increasing the pressure on the asset shortage [2][14]. Investment Strategy - A barbell strategy is recommended, which can control risks through duration and potentially benefit from the overall decline in interest rates and the narrowing of spreads [3][18].