Core Viewpoint - The article discusses the issuance and approval process of bank subordinated and perpetual bonds in China, highlighting the regulatory framework and expected trends in supply and demand for these financial instruments in 2026 [1][2][3]. Group 1: Regulatory Framework - As of March 18, 2026, there are no issuance plans for bank subordinated and perpetual bonds, but significant issuance is expected in the second quarter following the approval of these bonds [1]. - The issuance of subordinated and perpetual bonds by commercial banks must adhere to a strict "dual approval" regulatory framework, requiring simultaneous approval from the People's Bank of China and the National Financial Regulatory Administration [1]. - The People's Bank of China implements annual balance management for financial bond issuance, setting limits on new balances and total balances for the year [1]. Group 2: Issuance Trends - The approval and issuance of bank subordinated and perpetual bonds show clear seasonality, with approvals concentrated in the second and fourth quarters [2]. - There is a notable difference in the speed of issuance between large state-owned banks and smaller banks, with large banks typically issuing within 20-40 days after approval, while smaller banks may take over 40 days [2]. - Large banks prefer a "timed and phased" issuance strategy, while smaller banks tend to issue bonds in a concentrated manner shortly after approval [2]. Group 3: Supply Forecast - The total supply of bank subordinated bonds is expected to remain stable with a slight increase in 2026, with a significant release anticipated in the second quarter [3]. - The net issuance of bank subordinated and perpetual bonds is projected to be around 400 billion, with additional issuance of TLAC bonds to fill the TLAC gap [3]. - The estimated issuance volumes for various types of bonds in 2026 include approximately 720 billion for 10-year subordinated bonds, 90 billion for 15-year subordinated bonds, 880 billion for perpetual bonds, and around 300 billion for TLAC bonds, totaling about 2 trillion, slightly higher than in 2024-2025 [3]. Group 4: Investment Strategy - In the context of concentrated supply in the second quarter and rising inflation expectations, the investment strategy for bank subordinated and perpetual bonds should focus on "prioritizing coupon allocation and trading from short to long" [4]. - Investors are advised to focus on medium to short-duration bonds, with an initial emphasis on 1-3 year maturities, gradually extending to around 4 years [4]. - The article suggests taking advantage of potential price adjustments due to supply shocks in the second quarter, favoring more liquid subordinated bonds and considering various maturity strategies [4].